By Christopher Scuderi, DO, Vice-Chair, ACOFP Practice Management Committee;
and Judella Haddad, MD

Risk adjustment is a factor that the Centers for Medicare & Medicaid Services (CMS) uses to pay plans for the risk of the beneficiaries they enroll. This model estimates future health care costs for patients. Risk adjustment affects all commercial Medicare Advantage plans by influencing potential revenues and quality scores.

Hierarchical Condition Category (HCC) is the risk-adjustment methodology for Medicare used by all Medicare Advantage plans. HCCs stratify patient risk and predict the costs for capitated payments. This is because patients with only minor health conditions are expected to have averaged medical costs in the near future. Those who have multiple chronic complex conditions are expected to have higher costs due to increased utilization. 

Why is it important for a busy family physician to be aware of how they use these codes? HCC is important for your shared savings contracts and accountable care organizations. It is used to determine payments based on the illness burden and calculate Medicare spending for each patient. As more plans move to value-based payments, HCC scores are becoming more important to how you and your practice are reimbursed. 

Basics of HCC Coding

  • HCC is mapped to ICD-10 codes. Each ICD-10 is assigned to an HCC category.
  • Each patient is also assigned a score based on his or her demographics (age, living in the community or institution, Medicaid disability, etc.).
  • Risk adjustment factor (RAF) is assigned based on the patient’s HCC score (determined by coding) and a demographic score—the higher the RAF, the higher capitated payments. 
  • It is called hierarchical because for some disease states multiple HCCs can capture different severity of illness. Diabetes has many different manifestations but only the highest documented would count. Risk is assessed by the accumulation of all submitted diagnosis codes from unrelated diseases. For unrelated diseases, HCC scores accumulate (e.g., diabetes + hip fracture + heart disease).
  • Diagnoses from a base year are then used to predict payments for the following year.
  • Not all diagnoses are counted equally. CMS includes only the diagnoses that will best help forecast spending. Some diagnoses are given no weight at all.
  • CMS does not have a memory, so all HCCs must be revalidated annually and the clock restarts January 1.

How to Document HCC Codes

  • Try to be specific. For example, chronic atrial fibrillation (I48.2) has a RAF = 0.269. Try to choose this over cardiac dysrhythmia (I49.9), which has an RAF score of zero because it is not a weighted diagnosis.
  • Distinguish between treating an acute condition versus a sequelae of the condition. You usually do not treat acute CVA in the office; however, you do see sequela of CVA with facial weakness (I69.392). If you choose personal history of CVA, it implies no sequela (Z86.73).
  • For chronic or ongoing conditions without an active exacerbation, use “chronic” in your note, not “history of.” Chronic DVT of lower extremity (I82.509) with or without post-phlebitic syndrome (I87.09X) is a weighted diagnosis. If you choose history of DVT (Z86.718), this implies no sequela and this diagnosis is not weighted.

Coding Examples

Do not submit diagnoses that are not supported in the medical record, inactive, immaterial and unaddressed in your assessment and plan.

  • A 68-year-old with hypertension and hyperlipidemia. This patient has a BMI 40.0. They have been using their CPAP for years. 

    Hypertension ICD-10 code I10 RAF of 0. Hyperlipidemia ICD-10 code E78.5 RAF of 0.

    BMI of 40.0 is morbid obesity, ICD-10 code E66.01 RAF of 0.244. For this patient if the BMI is not coded, the total score for this patient is 0. By adding the BMI, the RAF becomes 0.244.
  • A 72-year-old patient with diabetes mellitus and circulatory complication. History of left toe amputation with hypertension. The patient is a smoker and you counseled 10 minutes on smoking cessation.

    Diabetes mellitus with circulatory complication ICD-10 E11.59 RAF of 0.305 compared to diabetes without complication ICD-10 E11.9 RAF of 0.105.

    Acquired loss of great left toe ICD-10 Z89.412 RAF of 0.521

    For total RAF 0.305 + 0.521 = 0.826 compared to selection of uncomplicated diabetes 0.105 + 0.521=0.621

Therefore, being specific matters.

Examples of Higher Scoring Codes

Liver transplant statusICD-10 Z94.4 RAF 0.823
Lung cancerICD-10 C34.90 RAF 1.018
Major depression, single episode moderatedICD-10 F32.1 RAF 0.343
Metastatic cancer ICD-10 C79.9 RAF 2.650
Morbid obesityICD-10 E66.01 RAF 0.244
Pressure ulcer stage 3ICD-10 L89.893 RAF 1.085
Pressure ulcer stage 4ICD-10 L89.894 RAF 2.039
QuadriplegiaICD-10 G82.50 RAF 1.300

For more information on hierarchical coding, listen to this podcast from Dr. Haddad and Dr. Scuderi: Hierarchical Condition Coding – Document and Code for Serious Illnesses for Accurate Payment

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