Hierarchical Condition Category (HCC) model

Understand how risk adjustment and HCC scores work

Risk Adjustment

Risk adjustment is when the Centers for Medicare & Medicaid Services (CMS) reimburses Medicare Advantage Plans, based on their members’ health. Risk adjustment was executed in order to pay Medicare Advantage Plans more accurately for the predicted cost of the care a member receives; this is done by adjusting payments based on demographics (age and gender) as well as health status.

CMS uses a system of Hierarchical Condition Category (HCC) codes to calculate the Medicare Advantage reimbursement and the performance of the providers that are participating in its Hospital Value-Based Purchasing Program. The Hierarchical Condition Category (HCC) model is used to understand the severity of each patient’s health status, and adjust payments appropriately.

How Does the HCC Model Work?

HCC codes are assigned to recipients across a year to recognize treatment for medical conditions. Each relevant code relates to an ICD diagnosis and has a weighted measure of the resources that are needed to treat it. So, the more complex and resource-demanding the group of recipients are, the higher the future payments are to the MA plans and providers who serve them. So adjusting inaccurate or incomplete documentation of complex conditions now presents a real opportunity for providers to improve the quality of care and the sufficiency of MA-related payments to providers.

Many variables influence the rate paid by CMS to an MA plan, even for the same patients within a specific geographic area.

Risk adjustment allows CMS to pay plans for the risk of the recipients they enroll, instead of an average amount for Medicare recipients. By risk adjusting plan payments, CMS is able to make fitting payments for enrollees with differences in expected costs.

Risk Scores

The risk scores measure an individual recipient’s’ relative risk, and risk scores are used to adjust payments for each recipient’s expected expenditures.

Several factors impact the risk score, but generally, the HCC risk adjustment is based on the enrollee health status and their demographic characteristics. The combination of the health status and the demographic characteristics determine the patient’s Raw Risk Score.

Since the physician cannot influence the age and sex of the patient, the only impact that a physician can have on the Raw Risk Score (and therefore on the payment) is the accurate documentation of the patient’s Health Status by billing the proper ICD codes.

How Is Health Status Determined?

Physicians use these diagnosis codes to document patient’s health status in a one-to-many relationship, around 3000 – 4000 ICD-9 codes relate to a lot of HCC Model Categories.
Each HCC Model Category relates to a “Relative Factor” or Health Risk Score.

Health Risk Scores are used to adjust MA payments. A change in the risk score can greatly affect the total payment you receive as part of this program.

Medicare Advantage providers whose payment is tied to the amount of money the plan receives for a specific patient have a fixed interest, along with the health plan, in documenting the proper ICD codes for each patient. If patients are coded properly, more dollars flow from CMS to the health plan and eventually that money makes it’s way to your practice.

How Does Risk Adjustment Impact Physicians and Members?

Increased coding accuracy helps Excellus BCBS identify patients who might benefit from disease and medical management programs. More accurate health status information can be used to match healthcare needs with the correct level of care. In addition to coding accuracy, a review of this type also helps to ensure that the health plans are reimbursed appropriately by CMS for how sick their members actually are. This process assists in enabling health plans to maintain member premiums at their current rate. Risk adjustment helps you meet your CMS provider responsibilities regarding reporting ICD-CM codes, including:

  • Secondary diagnoses, to the highest level of specificity.
  • Maintaining accurate and complete medical records (ICD-CM codes must be submitted with proper documentation).
  • Reporting claims and encounter data in a timely manner.

Elation Health Risk Assessment Score

Elation’s Risk Assessment Score is a close approximation to the CMS score, and can be used as an estimate of the risk they will calculate for your patient panel.

You can use the Elation Risk Assessment Score to:

  • Get visibility into patient risk levels and adjust care plans accordingly.
  • Ensure that high-risk problems are regularly addressed during the encounter.
  • Accurately document the care you deliver with a complete understanding of the relative risk weights of various ICD-10 codes.

Factors that affect the score include:

  • Patient demographics (age and gender)
  • Chronic condition diagnoses, based on ICD-10 codes selected in the patient’s problem list
  • Certain comorbidities
  • A normalization factor to adjust beneficiaries’ risk scores so that the average risk score is 1.0 in subsequent years.
  • A coding intensity factor, which adjusts for the difference between MA and FFS coding
  • Adjustments for if the patient is institutionalized or in the community
  • A lower score indicates a less severe status, where 1.0 is the average score for Medicare beneficiaries