New Changes from CMS for HCCs Reimbursement

Hierarchical Condition Categories (HCCs) and value-based care have been a major focus for healthcare organizations during recent years. As many of you may know, the Centers for Medicare & Medicaid Services (CMS) released the  related advance-notice final rule in April, and it includes major changes to the HCC reimbursement methodology that go into effect in 2024.

It is important to know about some of these changes and how they will impact your organization’s Medicare Shared Savings Program (MSSP), Medicare Advantage (MA), and other payment models, based on patient severity or risk scores. Some of the most notable changes pertain to how CMS performed their analytics to make changes to the payment model.

First, this is the first time CMS has used ICD-10 codes in their analytics for policy changes. Previously, CMS used historical ICD-9 codes, which we all know have not been used since 2015. CMS was hesitant to use ICD-10 claims data, as they have previously voiced concerns with the quality of ICD-10 data, as it was not at an acceptable level compared to ICD-9.

Premier has a very active government affairs office that advocates for and shapes federal laws and regulations to lead these transformations. A few years ago, we responded to CMS’s call to action on this, and opined on the critical need to conduct data analyses on ICD-10 claims and the clinical concepts inherent in the ICD-10 codes.

With CMS conducting analysis with ICD-10 codes, they have reclassified the HCC categories according to the clinical concepts in the ICD-10 codes. So, the bad news is that we need to now crosswalk the old HCC categories to the new ones because of this reordering of the HCC category numbers.

The most notable 2024 or V28 HCC methodology changes is the removal of the HCC designation for over 2,200 diagnoses. The removal of these HCC designations was based on the CMS cost analysis and other factors. CMS noted that there are significant differences between Medicare Fee-for-Service (FFS) and Medicare Advantage risk scores. CMS believes that the populations should be the same, and concluded that the Medicare Advantage coding practices contained significant error rates and/or were over-coded. This model change will have a significant impact on each patient’s risk scores, and mitigating this will be critical to be successful with your value-based care initiatives.

So, now moving away from HCCs a little and into the FY 2023 Inpatient Prospective Payment System (IPPS) Proposed Rule, CMS has requested public comments on how reporting of social determinants of health (SDoH) diagnosis codes might improve its ability to recognize severity of illness, complexity of illness, and/or utilization of resources under MS-DRGs. In this proposed rule, CMS reviewed the data on the impact on resource use for the ICD-10 SDoH Z codes that denote homelessness, currently designated as non-CCs (complication or comorbidity), as all of the SDoH codes are.

CMS noted that the data continues to suggest that when the three SDoH Z codes for homelessness are reported as a secondary diagnosis, the resources involved in caring for a patient experiencing homelessness support increasing the severity level from a non-CC to a CC. CMS has also recognized the challenges they have with data analysis due to organizations under-reporting SDoH codes.

Through our D.C. policy team, we will respond in support of CMS’s proposed rule to change the severity designation of homelessness from a non-CC to a CC. While this goes against CMS’s typical position of “not paying for improved coding,” the reporting of these codes is desperately needed if we want to collect meaningful data on this issue. So, I encourage all to look at their current organizational policies to incorporate collecting, documenting, and reporting the SDoH codes.

And lastly, in 2022 CMS also had a call to action on how to improve the HCC reimbursement methodology, and we again responded regarding the need to incorporate the SDoH codes into the reimbursement model. Just as the American Medical Association (AMA) has recognized the importance of the SDoH in the medical decision-making and in the assignment of the evaluation and management (E&M) code-level methodology, a SDoH component should be factored into the HCC risk score severity calculations.  

So, we are confident that CMS will include the SDoH codes for homelessness into the IPPS FY 2023 Final Rule, as this will give them a mechanism to appropriately capture the impact of SDoH on patient severity reporting.

Programming note: Listen to John Pitsikoulis report this story live as the special guest on Talk Ten Tuesdays today at 10 Eastern with Chuck Buck and Dr. Erica Remer.