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Compliance is a big part of the risk adjustment HCC.

Everyone is welcoming the New Year, and I am among them. This is a good time to take a look at some basics that make up the Medicare Advantage (MA) Risk Adjustment (RA) and Hierarchical Condition Category (HCC) model.

Those of us who work in revenue cycle, health information management (HIM), clinical documentation integrity (CDI), and compliance are surrounded by data, and it is data that really drives the HCC structure and payment model. This article presents some of the fundamentals that are basic keys to risk adjustment and HCCs.

We all know there are risks in our lives. It has been understood that smoking is a health risk, that driving without a seat belt carries a risk, and that even eating and drinking too much causes risks to our health, both mental and physical. Identifying and using risk and risk adjustment in the “insurance industry” has been in place for some time, accompanied by actuaries. Even the Medicare Inpatient Prospective Payment System (IPPS) uses some “risk adjustment” components when developing weights and payment for Diagnostic-Related Groups (DRGs).

Going back in time, it was the 1997 Balanced Budget Act (BBA) that mandated a Medicare risk adjustment model; in a phased-in approach, this would be under Medicare Part C, referred to as Medicare Choice. Under the 2003 Medicare Modernization Act (MMA), Medicare Choice was renamed Medicare Advantage. Risk adjustment is now an essential component of Medicare’s managed care option (MA), in which private, Medicare-participating health plans enroll Medicare beneficiaries and provide Medicare-covered benefits in exchange for a monthly premium.

The risk-adjustment patient system requires patient-level demographic information, as well as medical information such as diagnosis, functional status, or expected or actual treatment. Diagnostic information is used from the more than 70,000 codes included in the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM), and reported with a grouping methodology into categories that include a disease hierarchy.

The CMS-HCC model under Medicare Advantage is a combination of demographic and disease-based factors. The demographic variables include:

  • Age as of Feb. 1 of the payment year;
  • Gender/Sex of the beneficiary;
  • Disabled status, which can result in the inclusion of additional factors in the risk scores for disabled beneficiaries under 65 years old living in a community setting;
  • Original reason for entitlement, which can result in the inclusion of a factor in the risk score for beneficiaries 65 or older who were originally entitled to Medicare due to disability; the factor differs by the age and gender/sex of the beneficiary; and
  • Medicaid eligibility, which results in the inclusion of an additional factor in the risk score.

 Risk Factor
A risk factor is any attribute, characteristic, or exposure of an individual that increases the likelihood of developing a disease or injury. Individuals with risk factors are more likely to need medical care, hospitalization, and even intensive care. The risk adjustment factor, or RAF, is a relative measure used to predict the expenditure level of the patient with a particular risk or combination of risks.

Under Medicare Advantage, the RAF for the average patient is 1.0. Higher-cost and more disease burden results in  HCCs that have higher relative weights (coefficient). HCC relative weights are therefore similar to diagnosis-related group (DRG) weights, and to relative value units (RVUs) for CPT codes.

Disease hierarchies address situations in which multiple levels of severity for a disease (disease burden), with varying levels of associated costs, have been reported for a beneficiary. The hierarchies prioritize the inclusion in a risk score of multiple HCCs, wherein diagnoses are clinically related and ranked by costs.

Age, Gender, and Benefit
Within the Medicare Advantage risk adjustment model, there is a risk factor for age, gender (sex), and benefit status. As we all know, as we age, our health risks increase, so we see with advancing age there is an increase in RAF. There is also a RAF variation when it comes to having both Medicare and Medicaid, dual coverage, or being disabled.

Community versus Institution
In addition, if one resides within a community versus in an institution (i.e., a skilled nursing facility), there are differences in the RAF, and an institution setting results in higher weights for age/gender.

The use of ICD-10-CM diagnostic coding, in particular coding of chronic diseases/conditions, is critical to the MA RA reimbursement. The Official Guidelines for Coding and Reporting is a primary source for coding accuracy and data integrity. Not all ICD-10-CM codes are included in the HCCs, however, and specific clinical documentation coupled with a face-to-face encounter drives this data element collection. An example of ICD-10-CM codes and their respective HCC is as follows:

  • Acute subacute hepatitis without coma, ICD-10-CM K72.00 = no HCC
  • Acute subacute hepatitis with coma, K72.01 = HCC 27 (weight 0.882)
  • Cirrhosis of liver, unspecified, 60 = HCC 28 (weight 0.363)

The provider should see the patient at least once each year to determine the patient’s health status.

The physician must evaluate and document all chronic and/or active conditions. The diagnosis must be received from one of the three provider setting  types (hospital inpatient, hospital outpatient, and physician), covered by the risk adjustment requirements.

Disease Interaction
Within the Centers for Medicare & Medicaid Services (CMS) HCC model is “disease interaction;” this means that the system allows for higher risk scores for certain conditions in the presence of another disease or demographic status (e.g., disabled status) as an indication of higher costs. Congestive heart failure (CHF) and atrial fibrillation have an interaction, and this results in a risk factor (weight) in addition to the HCC for CHF and HCC for cardiac arrythmia.

Risk Adjustment Data Validation (RADV)
CMS requires that Risk Adjustment Data Validation audits be conducted. Risk Adjustment Data Validation is the process of verifying HCC/diagnosis codes submitted for payment with the support of medical record documentation. RADV aims at increasing auditing activity, consistent with an emphasis on reducing payment errors.

Compliance is a big part of the risk adjustment HCC, and per the Federal Register (for MA Plans),  “the MA organization agrees that its chief executive officer (CEO), chief financial officer (CFO), or an individual delegated the authority to sign on behalf of one of these officers … certifies (based on best knowledge, information, and belief) the accuracy, completeness, and truthfulness of relevant data that CMS requests.”

With Medicare Advantage enrollments continuing to increase (in 2020 there were a reported 24.1 million), those of us in HIM, coding, and CDI should really learn and understand this payment methodology.

The final annual updates to the CMS HCCs will often occur at the beginning of April, so we will need to keep an eye out for any changes at that time. However, in the meantime, be sure to join me for Feb. 18 and March 24 webcasts on HCCs, sponsored by ICD10monitor.


Gloryanne Bryant, RHIA, CDIP, CCS, CCDS

Gloryanne is an HIM coding professional and leader with more than 40 years of experience. She has an RHIA, CDIP, CCS, and a CCDS. For the past six years she has been a regular speaker and contributing author for ICD10monitor and Talk Ten Tuesdays. She has conducted numerous educational programs on ICD-10-CM/PCS and CPT coding and continues to do so. Ms. Bryant continues to advocate for compliant clinical documentation and data quality. She is passionate about helping healthcare have accurate and reliable coded data.

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