Hierarchical condition category (HCC) coding is a risk-adjustment model which is designed to estimate future healthcare costs for patients as defined by the American
Academy of Family Physicians (AAFP)1. This model was initiated by the Centers for Medicare & Medicaid Services (CMS) initiated in 2004 to adjust Medicare reimbursements to healthcare plans for the health expenditure risk of their enrollees.2
Each HCC coding will rely on the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) codes for assigning the risk adjustment factor scores (RAF) score of Medicare Advantage (MA) enrollees. Demographic factors including age and gender are also included by health plans to assign RAF score for enrollees.
What is RAF score?
The American Academy of Professional Coders (AAPC) defines RAF score, also known as risk score to be a numeric value an enrollee in a risk adjustment program and is assigned every calendar year.
The risk score of an enrollee resets every January 1 and is officially calculated by the state or government entity overseeing the risk adjustment program the member is enrolled in.3
Why is HCC coding important?
Through accurate HCC coding, it becomes easy to understand patient complexities and ensure correct reimbursements are being distributed. In addition, accurate HCC coding can help better predict healthcare resource utilization, quality, and cost metrics.
Today, the new ICD-10-CM system is expanding to ∼68,000 codes and has flexibility for expansion. The new ICD-10-CM codes have three to seven characters which are alphanumeric.4
How does inaccurate HCC coding impact reimbursement?
Incorrect documentation of HCCs will directly impact the reimbursements being released by the CMS.
For example, a patient having a chronic condition like diabetes with no complication with have a single HCC code, however, a diabetic patient with a complication will need documentation of more than one HCC code.
What are the best practices for improving HCC coding accuracy?
As mentioned above, RAF scores of MA enrollees reset every year, it is important to document active diagnosis conditions and chronic conditions too.
Let’s take a look at the effective coding measure suggested by AAPF5:
- Annual wellness visit is considered the best time to ensure capturing of all diagnoses appropriately.
- In addition, screening of risk factors for depression will help identify all the remaining additional diagnoses that can add to a patient’s risk.
- Code all diagnosis conditions at the time of the patient encounter or that affect the patient care or treatment.
- Old conditions which no longer exist should not be coded. History codes can be used as secondary codes, considering if the family history impacts current care or influences treatment.
- Adhere to the MEAT principles which means a diagnosis should be monitored, evaluated, assessed, or treated (MEAT). Diagnoses that are not supported by documentation will not be considered.
Click to read 2023 release of ICD-10-CM.
- The documentation must support a legible signature with credentials.
- Code to the highest level of specificity to ensure the diagnoses are well-sequenced on the claim.
Furthermore, some tips to consider when selecting the appropriate diagnosis code:
1. Type and underlying cause
3. Control status
4. Associated co-morbid conditions
5. Substance use/exposure
6. Site, location, or laterality
The Social Determinants of Health (SDOH) Z codes are ICD-10-CM diagnosis codes that capture potential health hazards related to socioeconomic and psychosocial circumstances. Z codes ranging from Z55-Z65 are the ICD-10-CM encounter reason codes used to document SDOH data.6