HCC Coding and Risk Adjustment Model

Risk adjustment and HCC coding (Hierarchal Condition Category) model was mandated by the CMS in 1997. Today, the payment model plays a crucial role in insurance benefits and reimbursement scenario. Under this model, a risk factor score is assigned to individuals who have been diagnosed with a chronic or serious illness based on demographics or health conditions. High reimbursement can be obtained only when HCC coding is accurate and there is proper documentation to capture the complexity of patient’s condition.

Risk Adjustment Model

HCC coding success is hugely dependent on how accurately and timely data is captured. It also depends on the proper tracking of a patient’s care and condition over a certain period of time.

How it works?

Health conditions of a patient are determined by ICD-10 diagnose that is submitted on claims by the physician. Based on the complexity of the patient’s condition, HCC codes allow payments to be risk-adjusted. Future financial utilization and risk is predicted by the risk adjustment model using a patient’s documented 12- month diagnostic coding history.

As per the risk adjustment model, demographics and diagnoses of a patient are used for determining a risk score. This is a relative measure of how costly that patient is being anticipated to be. For instance, a healthy patient will have a below-average Risk Adjustment Factor (RAF) score which means, revenue from the insurance premium is transferred from health patients to patients who have an above-average RAF score.

If chart documentation is incomplete or inadequate or if there is inaccurate diagnosis coding, then it will lead to lower risk score. Proper coding increases risk adjustment factor (RAF) scores and also helps improve the revenue flow of the practice.

When it comes to the risk adjustment model, payment rate of two patients in the same practice can differ. There are several factors on which this is based, determining the amount of work/risk involved in maintaining the patient’s health.

It is very important to ensure proper HCC capture and proper claims submission with codes that capture all manifestations of a chronic disease that a patient has. Since ICD-10 has increased code specificity along with requirements for detailed documentation, proper HCC capture has become vital.

Many practices are choosing to outsource HCC coding needs to a third party because it is helping them get timely revenue. They are also able to focus on quality care provision rather than worry about coding. 

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