Accurate coding can ensure plans receive the proper payments and help members connect with their providers. It can reduce costs, improve member engagement, and foster growth in the healthcare industry.

What is Medicare Risk Adjustment?

Medicare Advantage (MA) risk adjustment ensures that health plans are reimbursed relatively for their members’ anticipated healthcare costs. It is based on claims data and the Centers for Medicare & Medicaid Services Hierarchical Condition Category (HCC) method that puts related encounter data, like medical diagnoses, into groupings based on resource use. Higher HCC risk scores reflect greater anticipated Medicare Advantage risk and healthcare costs for health plan patients.

CMS has taken steps to prevent MA plans from gaming the system by removing codes from the system that were most often abused for up-coding, inflating risk scores, and gaining higher reimbursements from Medicare. However, many providers are still concerned that the HCC removals will shift resources away from dual-eligible Medicare Medicaid beneficiaries who need them most.

Achieving accurate and precise Medicare risk adjustment coding requires advanced technology that enables healthcare organizations to capture available patient information, detect ICD diagnosis codes that map to HCCs, and suggest ICD codes to optimize RAF Medicare payments. The right risk adjustment software enables healthcare professionals to streamline the reimbursement process, improve decision-making for revenue risk mitigation, and meet submission deadlines with the needed data.

What are Hierarchical Condition Categories?

Hierarchical Condition Categories (HCCs) are a proven and effective method of grouping medical conditions and diseases based on their impact on expected healthcare utilization and costs. HCC coding is widely adopted by Medicare Advantage plans and Medicare Shared Savings Program Accountable Care Organizations (MSSP ACOs) to accurately calculate patients’ risk scores, enabling them to make informed decisions and provide optimal healthcare outcomes.

During the HCC selection process, CMS weighed many factors, including data collection burden, predictive power, clinical coherence and homogeneity, and inclusion of rare, high-cost conditions. As a result, the CMS-HCC model contains 70 HCCs, representing a balanced tradeoff between reducing data collection and maintaining a high level of precision.

HCC coders must capture all diagnoses that impact a patient’s RAF score, as this information directly impacts future payments. The RAF score, sometimes referred to as the Medicare Advantage beneficiary’s risk adjustment factor (RAF medical abbreviation) and calculated based on a beneficiary’s history of disease management, reflects the overall healthcare burden on the beneficiary. A higher RAF score indicates more severe and chronic health conditions. A lowered RAF score indicates more normalized records.

What is a HCC?

HCCs profoundly impact the amount of money healthcare organizations receive from CMS to care for Medicare Advantage patients. They reflect the severity of patients’ conditions and forecast their future annual costs. Clinicians can leverage this methodology to improve patient outcomes at lower costs.

Each diagnosis code is mapped to a specific HCC category, and the sum of all diagnosed conditions estimates the patient’s risk. HCCs are based on ICD codes and organized into categories of body systems or disease processes. The categories are divided into smaller subcategories that share similar cost patterns.

Health plans submit these diagnosis codes to the government through an Electronic Data Submission (EDS) system for Medicare Advantage or the External Data Gathering Environment server for Medicaid and commercial risk adjustment models. Physician coders document these diagnoses on claims submitted to a health plan, which transmits them to the government agency overseeing the risk adjustment model a beneficiary is enrolled in. The agency then calculates a risk score for the enrollee and assigns them a denominator. This value is multiplied by the HCCs and demographic adjustments to produce an estimated annual expenditure benchmark for that beneficiary.

What is an HCC Payment?

In the Medicare Advantage and some ACA plans, patients are reimbursed an advanced fixed fee per month, also known as a capitation payment. Capitation models significantly incentivize healthcare organizations to control utilization and avoid unnecessary spending since they will face a financial loss if their costs exceed a pre-determined budget (i.e., the Medicare Parts A and B monthly cost limit).

Patient historical diagnosis information mapped to HCC codes creates a risk factor that varies by patient. That risk factor is multiplied by an expenditure benchmark, resulting in a dollar figure representing estimated annual healthcare costs for that beneficiary.

The CMS-HCC model utilizes ICD-9-CM diagnoses and their associated coding to predict future Medicare Parts A and B expenses for most beneficiaries. There is a separate model for institutionalized, new, and secondary-payer enrollees, each with its own codes and disease interactions that differ from those used in the community-wide model. The model is calibrated using 6-month lag data and updated annually. Each year, a provisional rate is established by January 1 and then reconciled by June 30.

 

Share.