Chronic conditions are the driving force in determining healthcare outcomes and costs in today’s value-based world, hence the interest in the Hierarchical Condition Category (HCC) coding payment model.

Coding chronic conditions and co-morbidities is becoming increasingly critical as the healthcare landscape shifts toward value-based care. Value-based care attempts to advance the triple aim of providing better care for individuals, improving population health management strategies, and reducing healthcare costs. Proper coding can play a vital role in achieving these goals by identifying the patient’s true burden of illness.

Recognizing, documenting, and coding the patient’s actual condition is important in value-based care for several reasons. First, it provides the necessary information in the patients’ records to make sure physicians are proactively monitoring and managing all ongoing chronic conditions. Not only does this enable high-quality, coordinated care and reduce costly hospital admissions and emergency room visits, it also provides the framework necessary to ensure that providers are following quality measures that must be reported for value-based payment. Additionally, detailed documentation and coding encourage more patient engagement, an important part of value-based care. When patient records contain an accurate recap of all ongoing conditions, physicians can more easily discuss these concerns with patients, educating and encouraging them to make lifestyle changes and take a more active role in their care. Lastly, proper documentation and coding validate and substantiate the cost of care, a critical component of value-based care that is under constant scrutiny by the Centers for Medicare & Medicaid Services (CMS) and private payers.

Value-Based Care Brings HCC Coding to the Forefront

Chronic conditions are the driving force in determining healthcare outcomes and costs in today’s value-based world. Consequently, there is much interest in the Hierarchical Condition Category (HCC) coding payment model. HCCs are disease groups organized into body systems or similar disease processes. CMS HCC Medicare Advantage (MA) is a reimbursement framework specifically designed by CMS as a way of giving weight to chronic conditions to make appropriate and accurate payments for enrollees with differences in expected costs of care. The goal of risk adjustment is to pay Medicare Advantage and prescription drug programs accurately and fairly by adjusting payments for enrollees based on demographics and health status.

Patients with chronic conditions are assigned a risk score based on their overall health status, relative risk that the condition will worsen, and various demographic characteristics. This risk adjustment factor (RAF) is a statistical tool that predicts speculated healthcare cost by reported ICD-10 diagnosis codes that identify future risk. Potential risk could include hospital admissions for a chronic condition exacerbation, costly treatments, or ongoing medications that may require consistent funding.

With the HCC payment model, providers should annually report all chronic conditions and co-morbidities to the highest level of specificity. The more chronic conditions a patient has, the more care may be required, so yearly reporting is crucial to ensure quality of care as well as proper funding. If providers do not report all conditions, money funded for a certain patient could be put into a negative balance, creating difficulties for the provider, payer, and patient.

A closer look at a few examples may provide insight into why accurate documentation is so critical.

For breast cancer patients, for example, initial treatment may include surgery, radiation, and chemotherapy. The patient may also take medication as a precautionary measure to prevent reoccurrence. Once the initial treatment is completed, the physician may document the patient’s condition as “history of breast cancer.” However, since the patient is still on medication, which must be funded, this does not accurately reflect the patient’s status, nor does it follow ICD-10 risk adjustment guidelines for reporting current diagnoses or history of diagnoses. If the patient is taking medications, then we as educators must collaborate with and guide providers on appropriate documentation to support current versus history.

Several years later, say this same patient is diagnosed with metastatic breast cancer that has spread to the lungs. The oncologist documents that the patient was seen for metastatic breast cancer, but neglects to indicate it has metastasized to the lungs. From the payer’s perspective, the patient has stable metastatic breast cancer, since the provider did not report the HCC code for metastatic disease that has progressed to other organs, a chronic condition CMS recognizes as requiring more funding. The true risk factor would probably be a 3.2, representing a more accurate picture of the real burden of illness, alerting the payer that adjustment in funding will need to accommodate the new severity of illness.  

In another example, if a patient has a history of below-the-knee amputation, the physician may not view this as a chronic condition. However, the amputation may have been caused by vascular disease, a chronic condition that should be documented. Providers should focus on care that might be needed in the future, even if the care is related to past conditions.

 Risk adjustment payment methodologies are being used across a variety of federal and state programs, as well as private and commercial insurance plans. While there are differences in these models, they basically all embrace the same methodology as the CMS HCC plan. Whatever the model, providers can ensure that they are getting credit for quality outcomes by consistently performing key activities that support quality care, such as engaging with patients, coordinating care with other providers, assessing, documenting, and reporting any diagnosis that affects the outcome of the patient’s visit or care plan; discussing any diagnosis relating to whether the condition is chronic or not; and closely monitoring chronic conditions. Providers should think about possible exacerbations or anything in the patient’s condition that may require future funding, and document each condition to the highest level of specificity. The chronic conditions providers should be following are listed in the Medicare HCC list, and all providers should be familiar with that information.

Best Practices for Coding Chronic Conditions

 Employing best practices and adhering to Medicare guidelines for documenting and coding chronic conditions can help ensure revenue optimization, as well as enhance quality of care. Here are a few essential practices that should be followed:

  • All pertinent information should be included in the provider’s progress notes. Report everything from the office visit that affects the plan of care for the chronic condition.
  • Chronic conditions must be coded annually with the highest level of specificity.
  • Patients must be evaluated by a medical doctor, a DO, a nurse practitioner, or an advanced practice provider during a face-to-face visit.
  • All chronic conditions should be discussed and documented when meeting with a new patient. If the condition does not affect the patient’s care six months from the initial visit, there is no need to report it again.
  • Document only confirmed diagnoses, not suspected conditions.
  • Do not cut and paste the patient’s problem list and transfer it into the progress notes. Providers must link the chronic condition with the care plan by evaluating, assessing, monitoring, or treating the condition in some way, documenting care they provided or plan to provide. If chronic conditions are not linked to the care plan and a data validation audit occurs, the code will be removed and not counted as part of the patient’s risk adjustment factor.
  • Progress notes must be signed by the provider for chronic conditions to count for an office visit.

Keep Current and Have Processes in Place

Practices must have policies and efficient processes in place to support providers in properly documenting and reporting diagnosis codes for chronic conditions. Staff should refer to Medicare’s website at regular intervals to stay current with the latest guidelines for appropriate coding of HCCs. Policies should be established to ensure that every office in the practice updates their CPT and ICD-10 code books annually. Key personnel should become familiar with industry resources, not only for the HCC payment plan, but for similar models as well. Finally, a process should be developed to ensure that all information in the provider’s progress notes is reported to payers in a timely fashion. Healthcare organizations that follow these best practices will master the art and science of documenting and coding chronic conditions, supporting high-quality, value-based care while optimizing revenue.


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