Blog Post

Maximize your reimbursement with accurate HCC capture

April 18, 2018

    Hierarchical Condition Categories (HCCs) have been included in Medicare's methodology for risk adjusting provider payment since 2004. And while not new, they continue to be a topic of concern for many health systems. This concern is being driven by two larger industry trends: the tightening of margins, and increasing enrollment in Medicare Advantage (MA) plans.

    As margins tighten, accurate reimbursement will be critical to ensuring organizations can properly resource the care needs of their populations. HCCs play an important role in tracking patient acuity and ensuring providers and hospitals are reimbursed fairly, and an influx of Medicare Advantage patients make HCCs of even greater strategic importance since MA payment methodology rests heavily on HCCs.

    Improving HCC capture can lead to more accurate provider reimbursement—but in order to improve capture, it's important for organizations to understand how HCCs work.

    HCC overview

    HCCs are groupings of ICD-10 diagnosis codes for active and chronic conditions that are predictive of the total cost of care. There are currently 79 active and designated HCCs, and each is assigned a weight reflective of predicted increased resource uses, which is used in calculating patient risk scores and adjusting payment. HCCs are used to adjust providers' payments based on patient complexity, and improving HCC capture will adjust the financial benchmarks used in Medicare Accountable Care Organization contracts and will alter per member, per month (PMPM) payments to MA plans.

    In order to ensure proper payment, diagnoses of chronic and active conditions that fall under HCCs must be updated every 12 months. CMS will downgrade a patient's risk score for the following year if these conditions are not noted in the documentation, even if the condition still exists.

    Financial implications

    Across all risk contracts, HCC capture is important. If providers don't code appropriately and to the highest degree of specificity, they risk lowering the financial benchmarks and/or payments. However, improving HCC capture has the greatest impact on financial performance under MA. MA plans are paid PMPM based on HCC risk adjustment from the previous year. Improving HCC capture can increase the risk-adjusted capitated payments from Medicare to the health plan.

    Improving documentation and coding can also impact a hospital's financial performance under inpatient quality improvement programs, because risk adjustment for select quality measures under MIPS, VBP, HAC, and HRRP, depends on the documentation of patient acuity, similar to HCC methodology. To impact scores, documentation must take place in an outpatient setting 12 months prior to admission (or readmission).

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