Between 1960 and 2009, US healthcare costs rose from five percent of GDP to over seventeen percent, making healthcare unaffordable for many Americans in lower income brackets. The 2010 Affordable Care Act (ACA) mandated the availability of affordable healthcare to most Americans and assigned the Centers for Medicare and Medicaid Services (CMS) with the task of fulfilling this mandate at a cost that would fall within feasible budgetary constraints.

Traditionally, US healthcare services have been rendered on a “fee-for-service” (FFS) basis, meaning that any given healthcare system offering a given service (e.g. stent procedures for heart patients) charged a specific amount to all patients receiving that service. A key component of CMS’s cost-control strategy was to move away from FFS and instead base payments on cost and quality, commonly expressed as “value.” Consequently, the term “VBC” (short for “Value-Based Care”) was introduced into the lexicon of healthcare acronyms.

One of the first steps taken by CMS in their transition toVBC was to address the lack of alignment between the severity and complications of a specific disease and its associated treatment cost over time. In response, CMS established a new coding model that associates a numeric disease category—called a Hierarchical Condition Category or HCC—with a diagnosis code—expressed using version 10 of the International Classification of Diseases (ICD-10)—and a risk adjustment factor (RAF) representing the estimated additional risk and cost that this HCC represents. There are currently seventy-nine HCCs associated with about 9,500 ICD-10 codes.

HCC Coding in Medicare Advantage (MA) Plans

Medicare Advantage (MA) is a CMS program that incentivizes private health insurance companies (payers) to collaborate with providers to efficiently manage Medicare populations. CMS provides a per-patient capitated monthly payment to the payer for treatment of MA patients enrolled in a payer’s MA program.

Since this amount represents the cost for treating an average patient, CMS also agrees to pay an additional amount for properly documented sicker patients.

Since a significant number of patients in an MA population will have health issues, the payer is strongly incentivized to optimize the RAFs for the entire MA population. To do so, CMS requires an in-person physical exam of each patient at least once per year, during which the patient’s HCCs must be reviewed, verified, treated and thoroughly MEAT documented. (MEAT is yet another acronym, short for “monitor, evaluate, assess, and treat.”) To ensure that this exam occurs, payers may elect to provide additional compensation to FFS providers at the point of care for the additional time required to properly diagnose, document and treat the patient. As providers transition to VBC, the incentives of both providers and payers will likely become more naturally aligned in their financial and treatment models.

HCC Coding in Accountable Care Organizations (ACOs)

Accountable Care Organizations (ACOs) were the firstVBC-focused organizational models defined and implemented by the ACA. They are typically either partnerships of physicians (some exclusively primary care) or of hospitals and specialty clinics. ACOs initially partnered with Medicare for their payments, but over time they have entered into similar relationships with commercial payers. Although their reimbursement models differ from MA, they, too, are based on HCC coding. CMS recently announced its Pathways to Success program, which will require all ACOs to take on downside risk within a three-year time period. Downside risk will almost certainly put additional pressure on accurate RAF scoring.

Improving HCC-supported Quality and Effectiveness

Developing HCC coding best practices is key to the implementation of VBC in healthcare. Following are a few key best practices.

- Annual Wellness Visits (AWVs) are the most important milestones in each annual quality cycle for successful implementation of VBC. AWVs are an opportunity to review past patient problems and to identify emerging problems. Providers and payers should collaborate to make the most of this opportunity.

- Accurate, thorough problem lists, and MEAT documentation don’t just protect providers and payers from RADV audits; they help retrace a patient’s healthcare journey, providing present insights through past experience.

- Data from all relevant sources, including EMRs and payer claims data ensure that “orphaned” ICD-10 codes, procedures, etc. are reviewed for potential HCC additions.

- Provider buy-in and training (in that order) ensures that providers first understand why the organization is focusing on improving its HCC coding process. Once they are bought in, the training is the easy part.

- Decision support systems can help improve HCC coding decisions in real time. There are a variety of software tools that can help implement these systems.

- Analytics provide insight into how effective HCC coding efforts have been in treating patients and improving RAF scores. Analytics tools, such as Tableau and Dundas BI, improve insight into both progress and potential improvements.

Next Steps

Set up a demo with Juxly and see how Vault can help improve your HCC Coding quality and effectiveness.

Download the entire paper (attached below) to access example HCC coding exercises.