support@altumed.com

How to Navigate the Complexities of Risk Adjustment and HCC Coding – An outlook on different Payment models!

As healthcare evolves, new payment models emerge in the managed care industry. Risk Adjustment and HCCs: a lesser-known concept. For Pro-fee medical coders, we'll briefly cover HCC, Risk Adjustment, and payment models.

Introduction to payment models:

To grasp Hierarchical Condition Categories, we must understand payment systems. For that, three names come to mind:

1) Fee-for-service Model


2) Bundled or episodic care


3) Capitation Arrangement

Fee for service (FFS) is the fundamental traditional pricing model in healthcare. In FFS, providers are reimbursed based on services and procedures. In FFS, payments are per service, unlike bundled episode-based care. Capitation pays providers a fixed amount per patient per month to meet targets.

Volume vs Value?

These three are a part of ‘Volume’ based models. Providers and healthcare organizations are increasingly embracing 'Value' based models. Programs APMs and MIPS, HEDIS are well-utilized. Value-based care prioritizes patient outcomes over quantity-focused models like FFS. Now, Risk adjustment and HCC coding are central to value-based care.

How does HCC coding works?

HCC coding predicts future costs for Medicare Advantage patients in risk-adjustment models. Risk adjustment calculates patient health status into a risk score to predict costs.

CMS assigns scores to diagnoses, including Pharmacy and ESRD categories:

Click to open the image

Unspecified diagnoses cannot calculate risk scores. It is also important that in the course of treatment, the diagnosis code also progresses. An unspecified diagnosis can evolve into a higher-risk score over time. There is variability within an individual from one year to the next in their need for medical care.

Tell us more about Risk Scoring?

Each HCC diagnosis group comes with its own score. Severe chronic illnesses with complications classify high-risk patients, increasing HCCs & treatment cost estimates.

A beneficiary's CMS-HCC risk score sums the weights of demographics and HCCs. The CMS-HCC model is normalized to 1.0. Beneficiaries with a risk score below 1.0 are seen as relatively healthy and less costly. Risk scores are easy to interpret, with 1.0 equaling average costs and 0.1 indicating 10% of average costs.

What other Factors determine Risk Score?

Risk scores in a model are influenced by demographics like age, gender, and health status. Risk scores also consider Medicaid eligibility, initial Medicare qualification, and long-term care residence. At year-end, average risk scores are calculated for each provider's members.

How payment works with HCC or Risk Adjustment Models:

The idea of healthcare organizations getting paid through HCC is quite simple. Costs can be estimated concurrently or set prospectively. Many organizations use Risk Adjustment or value-based care software for calculations.

Here, for instance, three providers (A, B, and C) are handling a patient, the payment would be shared as such:

Providers are compensated based mainly on patient health outcomes, which is intriguing!

Why HCC coding specificity is important:

ICD-10 CM codes require high specificity to determine health status. Typically, the predictor variables are binary condition categories.

Specificity is essential to receive full reimbursement. Diabetes without complications pays $894.40, while diabetes with ESRD pays $1273.60. The ability to document with greater precision can dramatically impact payment amounts.

An HCC coding specialist, or risk adjustment coder, assigns a risk score to each patient. The coding can be performed in Physician's site of practice such as an Office or as an auditing contractor.

An HCC coder captures a complete picture of a patient’s health status. The ability to do that, heavily relies on Provider documentation. One key missing detail can tip the scale. Lack of specificity can result in an inaccurate risk score, affecting reimbursement. A strong Risk score stands on a strong clinical documentation.

Where HCC Risk Adjustment Model will work in future?

CMS categorized over 72,000 ICD-10-CM codes into about 1,500 DXGs. Codes were placed in DXGs if they were related to clinical and cost characteristics. CMS created HCCs from DXGs for the CMS-HCC risk adjustment model version 28. In the past, it was based on ICD-9; for 2024, it will be based on ICD-10 data. Payers use diagnosis code groupings to compare quality, cost, and resource use.

Report all relevant co-existing conditions impacting patient care and management. Report chronic conditions annually for accurate risk score calculation in risk adjustment.

Here are some Highlights from latest Version 28 for HCC risk score estimation:

CMS is moving from HCC Version 24 (V24) to Version 28 (V28).

CMS will transition from CMS-HCC v24 to v28 by 2026. HCCs are renamed/renumbered in version 28 for three main reasons.

  • Despite more HCCs, about 2,000 fewer ICD-10-CM codes are designated as HCCs.
  • New HCCs were established, increasing the total number of HCCs to 115 from 86. HCC 35 Pancreas Transplant Status replaces ICD-10-CM code Z94.83 in the current model (v24).
  • Finally, the coefficient of risk adjustment factors (RAF) also changed. For instance, the chronic hepatitis RAF varies by 038 between versions:147 (V24) and.185 (V28).

This creates a challenge for providers to follow both systems, as one risk score for the same diagnosis can vary in both systems.

  • This update aims to improve the accuracy and specificity of the HCC model based on ICD-10-CM. ICD-10-CM coding improves data capture, cost prediction, and risk adjustment. This ensures accurate payment calculations.

Is value-based care through HCC all that perfect?

Despite issues, value-based care pricing models, like risk adjustment, aim well. In quality-focused models, providers prioritize patient needs and are rewarded long-term.

Patients get the best deal out of any value-based care pricing model. They get the services at their actual cost and value. However, it can be considered a collaborative effort. Practices might still take the situation as a hassle. They may feel overwhelmed by the complexity and deviation from traditional models.

An often-mentioned drawback is the unpredictability and subjectivity of risk-scoring outcomes. Disease progression and outcomes can be uncertain and challenging to quantify. HCC coding strongly emphasizes using the most suitable diagnosis for scoring. Enhancing documentation universally helps reduce misuse of diagnosis codes, irrespective of pricing models.

An HCC coder should adeptly capture a patient's complete health status. The ability to do that heavily relies on provider documentation. One key missing detail can tip the scale. Lack of specificity leads to inaccurate risk scores, impacting reimbursement. A strong risk score stands on strong clinical documentation.

AltuMED is a Medical Billing Services and Solutions Company. We excel at combining Revenue Cycle Management acumen with technology, enabling industry leading solutions to optimize financial health of Medical Practices and Clinical Labs. Find out more!

Subscribe to Our Newsletter!

SUBSCRIBE

Subscribe to Our Newsletter!

Enter Your Email Address. We Promise We Won't Spam You

Follow Us

Subscribe to newsletter

Enter your email to receive our newsletter, so you can stay in the loop with our latest promos.

Subscribe to Our Newsletter!

Enter your email address to

receive "Go Practice" as an email newsletter.