Hierarchical Condition Categories and How They Affect Reimbursement

Hierarchical Condition Category coding — or HCC coding — was implemented by the Centers for Medicare and Medicaid Services (CMS) in 2004 to help estimate the healthcare costs of Medicare enrollees in the coming year. Today, Medicare Advantage plans, the Medicare Shared Savings Program, Medicaid, and private health plans use the CMS-HCC risk adjustment model to determine the health mix of their member enrollment and the reimbursements they can expect from CMS.

What is an HCC?

An HCC is a category of chronic medical conditions that share similar cost patterns.

For example, diabetes, chronic obstructive pulmonary disease (COPD), asthma and pulmonary disease, congestive heart failure, breast and prostate cancer, rheumatoid arthritis, and depressive disorder are all individual HCCs.

The model is hierarchical because many disease states have different levels of severity. For instance, diabetes with complications has a different HCC code than diabetes without complications. While patients may have multiple HCCs based on different manifestations of a disease, the model ensures that they will be assigned the HCC that reflects the most severe disease state. HCCs do not roll over to the next plan year and must be documented and re-submitted each year.

Because of COVID-19, CMS is allowing providers to use telehealth to conduct patient visits and submit their diagnoses, as long as the visit meets CMS guidelines for risk adjustment.

There are more than 86 HCC codes included in the 2020 CMS-HCC Risk Adjustment Model.

How are HCC Codes determined?

HCCs are based on the International Classification of Diseases (ICD-10-CM) codes and supplied to health plans and Medicare by healthcare providers. ICD-10 codes document patients’ diagnoses. There are over 10,000 ICD-10 codes that reflect the specificity of each medical condition.

While HCCs are based on ICD-10 codes, not all ICD-10 codes map to an HCC. For instance, a non-chronic condition that does not affect long-term health, like abdominal pain or a sprained wrist, will not map to an HCC.

The HCC model is continuously updated with the goal of clinical document improvement.

Who developed ICD-10?

The World Health Organization (WHO) developed ICD-10 codes to provide consistency in the way disease and health conditions are reported globally and enable nations to compare and share their health data.

How is an HCC turned into a risk score?

Each HCC code is assigned a certain weight/score. When combined with the patient’s age and gender, the HCC code is used to determine a patient’s risk adjustment factor (RAF), also known as a risk score. Risk scores are then used to adjust the payment.

If you have more questions about how HCCs work and would like to talk with an expert, please call us at Ciox . We are a trusted partner for over 120 health plans and continue to innovate to bring you the most innovative health information management solutions.

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