A Brief Overview of HCC and Risk Adjustment Coding

I would like to take a moment and go over the importance of RA, HCCs and quality of data abstraction. What is RA and HCCs. Risk Adjustment is a method used to adjust payment based on health status and demographic characteristics of a patient. Risk adjustment calculations consider diseases that have a significant impact on patient cost of care.  Without Risk Adjustment payment is based on demographics alone, with Risk Adjustment each member’s health status reflects the costs associated with their individual health care needs and ensures accurate and adequate payment based on expected medical costs. Hierarchical Condition Categories (HCC) is a model implemented by CMS in 2004 to adjust capitation payments for health care costs. It includes chronic diseases that are a cost burden such as: Diabetes; Chronic Kidney Disease; Morbid Obesity and malignant neoplasms. HCCs can be used to classify patient conditions, and each has an associated Risk Adjustment Factor (RAF). The health risk of an individual is represented by the sum of RAFs for his/her conditions, typically calculated annually based on all the conditions in billed claims during a calendar year. Here is an example of calculated RAF scores.

85 year old Male0.44285 year old Male0.44285 year old Male0.442
Medicaid eligible0.151Medicaid eligible0.151Medicaid eligible0.151
Not codedDiabetes unspecified (HCC19)0.118Diabetes with complications (HCC18)0.368
Not codedCHF (HCC85)0.368CHF (HCC85)0.368
No Disease interactionDisease interaction   (DM and CHF)0.182Disease interaction   (DM and CHF)0.182
RAF Score0.593RAF Score1.261RAF Score1.511

As noted by the table, reporting HCCs can have a great impact on the RAF score. To ensure we capture all HCC conditions that are treated during the patients encounter basically depends on two factors. One being complete and through documentation. This is reliant on a skilled CDI staff to review documentation and facilitate physician education to ensure that all conditions treated are documented to the greatest specificity possible. Second, a skilled HIM staff that includes Coders who understand the importance of data abstraction, the Official Guidelines for Coding and Reporting, Coding clinics, and compliant physician queries; and an auditing staff to review and validate codes submitted to billing, provide coder education and work with CDI staff to help identify documentation insufficiencies.

In this fast paced, ever changing field of the Mid Cycle Revenue system, the quality of data that is generated and abstracted is of paramount importance to the entire medical field. The data we submit goes far beyond just facilitating the revenue cycle, it has an exponential impact on many different platforms. Take for example, the National Registries. These programs compile coded data, which is analyzed by experts in the field who then use this data to improve therapies. Resulting in better outcomes, cures to diseases and saving lives. The quality of data we submit has a great impact on these programs and many other aspects of the medical field.

Everything we do matters.


Daniel Caillouet CCS, CPC
HIM Inpatient SME MPU


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