HCC Codes Explained: The Importance of Accurate Coding

Key takeaways:

• Hierarchical Condition Category (HCC) Coding is becoming more widely used as the healthcare industry transitions to value-based care (VBC).
• The Centers for Medicare & Medicaid Services (CMS) estimates anticipated costs for Medicare Advantage (MA) participants using the HCC risk adjustment model.
• Accurate HCC documentation helps healthcare organizations receive appropriate reimbursement and provide better care to patients.

The healthcare payment reimbursement system in the U.S. is undergoing a massive transformation. The Centers for Medicare & Medicaid Services (CMS) and Medicare Advantage (MA) plans continue to shift away from traditional fee-for-service (FFS) reimbursement and toward value-based payment. Now more than ever, risk scoring has taken on new importance.

Currently, CMS incorporates a risk score metric into every value-based payment (VBP) program it administers. This score is the key to success in VBP programs and essential to assuring there is adequate payment to cover the costs of sicker patients.

With this in mind, healthcare organizations at all stages of the VBP journey need to better understand the clinical and financial impact of accurate coding and documentation to ensure risk score accuracy.

Here’s what you should know.

• CMS groups similar diagnosis codes together into Hierarchical Condition Categories (HCCs). CMS uses historical data about the cost associated with each HCC to estimate the costs to care for specific beneficiaries.
• Clinicians document the patient’s diagnoses in the medical record which are submitted for payment in the form of corresponding International Classification of Diseases 10th Revision (ICD-10) diagnosis codes. These codes can become very specific since there are thousands of diagnoses that can be given depending on a patient’s problem.
• It’s important for providers to code according to the documentation in the medical record and be as detailed as possible because accurate and complete ICD-10 documentation significantly impacts payments in value-based arrangements.

Capturing HCC diagnoses can directly increase MA rates and assure appropriate payment in all Medicare alternative payment models. Without accuracy, there may be insufficient payment to cover the costs of care for sicker, more complex patients.

HCC Coding in Action.

For example, let’s say Jane, a Medicare End-Stage Renal Disease (ESRD) beneficiary, visits a hospital complaining of fatigue, nausea and extreme thirst. The provider performs tests on Jane that lead to documented chronic conditions such as obesity and Type 2 diabetes, for a risk score that pays $9,568 a year.

However, Jane is far sicker than previously assumed. A more thorough review of the chart shows that she has a body mass index (BMI) indicating morbid obesity and diabetic retinopathy associated with her Type 2 diabetes.

When her complete health status is properly documented with the appropriate ICD-10 codes and HCCs, her composite risk score goes up, as does payment. In this scenario, the more specific diagnosis would lead to payments of $33,781 – a difference of $24,000 for a single patient.

The more accurate risk score assures that Jane’s care team will be adequately compensated for the complicated care needed to address each of her health concerns. Overall patient quality scores, clinical care, and patient experience improve as a result of accurate HCC captures.

While achieving accurate coding and documentation must be a priority, it can be challenging for very busy clinicians and there is no silver bullet answer for this multifactorial, complex physician workflow process.

That’s where Premier's Clinical Decision Support technology comes in.

Using real-time HCC Clinical Decision Support (CDS) and analytics makes it easier to pinpoint specific areas where HCC opportunities exist to help drive gap closure. Premier's advisory services team can help determine the root cause of missed opportunities, whether it be technical or behavioral and work on remediating them.

While Premier’s Stanson Health’s HCC alerts, with their AI-enabled capabilities, are designed to be actionable and built to limit the provider’s administrative burden. At the core of Stanson Health's approach are two innovative HCC coding solutions: CodingGuide and CodingCare. These solutions are designed to seamlessly integrate alerts into the electronic health record (EHR) workflow, effectively prompting providers to add necessary codes. With CodingGuide, providers receive actionable HCC guidance, helping to streamline administrative tasks and ensuring accurate reimbursement. Meanwhile, CodingCare builds upon CodingGuide by actively involving coders and documentation improvement specialists in both pre- and post-encounter documentation.

Recently Stanson Health's HCC solutions helped Indiana health system Community Health Network (CHN) assure adequate payment for their patients in their MA plans and Next Gen Accountable Care Organization. Despite financial hardships from COVID-19, CHN was able to obtain a positive financial impact of nearly $13 million with actionable HCC alerts.

“The HCC alert was followed 64 percent, and if you are familiar with alerts in an EMR, a follow rate of 64 percent is nearly a miracle. We shoot for 40-50 percent as a gold standard, so to have it at 64 percent tells you that providers really were accepting of this workflow and the alert when appropriate,” said Patrick McGill the Chief Transformation Officer of CHN.

With the use of Premier tools, health systems can worry less about documentation and coding, and instead focus their attentions on improving patient outcomes, lowering costs, generating revenue and increasing provider satisfaction.

Ready to take your HCC coding to the next level? Learn more about Premier's HCC approach.

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