Register now for Hierarchical Condition Categories (HCC) Basics webinars

Hierarchical condition category (HCC) coding is a risk-adjustment model originally designed to estimate future health care costs for patients. The Centers for Medicare & Medicaid Services (CMS) HCC model was initiated in 2004 but is becoming increasingly prevalent as the environment shifts to value-based payment models.

Hierarchical condition category relies on ICD-10 coding to assign risk scores to patients. Each HCC is mapped to an ICD-10 code. Along with demographic factors (such as age and gender), insurance companies use HCC coding to assign patients a risk adjustment factor (RAF) score. Using algorithms, insurances can use a patient’s RAF score to predict costs. For example, a patient with few serious health conditions could be expected to have average medical costs for a given time. However, a patient with multiple chronic conditions would be expected to have higher health care utilization and costs.

Why is HCC coding important?

Hierarchical condition category coding helps communicate patient complexity and paint a picture of the whole patient. In addition to helping predict health care resource utilization, RAF scores are used to risk adjust quality and cost metrics. By accounting for difference in patient complexity, quality and cost performance can be more appropriately measured.

*Example #1: A 68-year-old patient with type 2 diabetes with no complications, hypertension, and a body mass index (BMI) of 37.2  

ICD-10 DESCRIPTION RAF
E11.9 Type 2 diabetes with no complications
I10 Hypertension
Z68.37 BMI of 37.2
Total Risk= 0

*Example #2: A 68-year old patient with type 2 diabetes with diabetic polyneuropathy, hypertension, morbid obesity with a BMI of 37.2, and status post-left below knee amputation (BKA) 

ICD-10 DESCRIPTION RAF
E11.42 Type 2 diabetes with diabetic polyneuropathy 0.0368
I10 Hypertension
E66.01 & Z68.37 Morbid obesity with a BMI of 37.2 0.365
Z89.512 Status post-left BKA 0.779
Total Optimized Risk 1.1808

*These are sample patients only, using 2017 CMS HCC model values and 2018 ICD-10 codes.

HCCs are derived from ICD codes (diagnoses) via retrospective review of claims data. ICD codes are factored into the algorithm regardless of site of service (inpatient or outpatient), provider type (physician or extender), or order of diagnosis (primary or secondary). An ICD code maps to exactly one HCC, but not all ICD codes map to an HCC. Approximately 10,000 ICD-10 codes map to an HCC, but this is just 14 percent of the approximately 69,000 diagnosis codes. The CMS-HCC model focuses on chronic health conditions likely to affect long-term health expenditures and purposefully excludes non-diagnostic diagnoses (e.g., a diagnosis of abdominal pain), clinically insignificant diagnoses (e.g., a sprain), or diagnoses that are definitively treated (e.g., acute appendicitis).

HCCs are termed hierarchical because, for some disease states such as diabetes, multiple HCCs capture differing severity of illness. Within an HCC grouping, a patient is assigned only the HCC that corresponds to the most severe manifestation documented. For example, if review of a beneficiary’s claims data finds ICD codes mapping to both HCC 17, Diabetes with acute complications (e.g., ICD-10-CM code E08.11), and HCC 19, Diabetes without complication (e.g., ICD-10 code E08.9), the model would assign only HCC 17, because it is the more severe manifestation of diabetes.

Although HCCs within a disease grouping are mutually exclusive, as in the example above, HCCs from different disease states are additive within the model. A beneficiary can be assigned both HCC 86, Acute myocardial infarction, and HCC 19, Diabetes without complications, each of which would provide for risk adjustment.

The CMS-HCC risk-adjustment model was designed to most accurately predict spending at the group level, not the individual beneficiary level. Thus, the expenditure predicted for an individual beneficiary is likely to be less accurate than the expenditure predicted for a group of beneficiaries.

It is more helpful, then, to look at risk scores at the practice level. To manage risk effectively, a practice should know its risk score for each insurer with which it has a value-based contract. If your practice doesn’t have this data, ask for it.

Join us for important HCC webinars in April

For more on how to calculate your risk scores, document and capture HCC’s appropriately, and why all of this is important to your practice’s over all survival, register for our “HCC Webinar: The basics in hierarchical condition category” on March 12th, 2019 for Part 1 (the basics) of this important series. We will follow with Part 2 (How this works) on March 14th, 2019. You can find our registration access on our Services Page and click on Specialty Coding Seminars or click on the buttons below for each webinar:

Register For Part 1

Register For Part 2

Categories: Webinar

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