Thursday, August 9, 2018

Hierarchical Condition Categories (HCCs) by Nicoletti

Excerpt from The Field Guide to Physician Coding, 
4th Edition
By Betsy Nicoletti, MS, CPC

If you find this sample chapter educational, review the book Table of Contents at the link below, order the print or eBook, or order multiple copies for your staff members at discounted rates.  

Every entry for the coding "rule" has a citation "proving" the rule. 

Sample Chapter:
Hierarchical Condition Categories

Definition: HCCs is a risk adjustment model developed by Medicare to pay Medicare Advantage plans. It estimates the expected health care costs for individuals for the next 18 months.

Explanation: In fee-for-service medicine, diagnosis coding establishes medical necessity, and may be the reason for a denial, particularly for diagnostic tests or procedures. Services with national or local coverage policies often have specific diagnosis codes that are required for payment. In risk-based contracts or shared savings programs, payers assess the acuity of a panel of patients, and use that acuity along with age/gender distribution, cost, quality and outcomes, to provide incentive payments or decrease payments at the end of a contract year.

Codes: Selected International Classification of Diseases, 10th Edition (ICD-10) codes.

Coverage: This is the system the Centers for Medicare and Medicaid Services (CMS) uses to adjust payments to Medicare Advantage plans. Some medical groups are part of shared savings programs with Medicare or have risk adjusted contracts with commercial payers. Some private payers use proprietary systems to estimate risk and future payments, and some use HCCs. Using this system in medical practice payment is part of moving from volume-to-value.

Billing and Coding Rules: The risk for an individual is determined by two things: demographics and diagnoses. A 65-year-old living at home has a lower demographic risk score than an 80-year-old living in a long-term care facility, who is dually eligible for Medicare and Medicaid. Demographic factors included in HCC calculations are age/gender, living at home or in an institution, End-Stage Renal Disease (ESRD) patient, and dual eligibility for Medicare and Medicaid. Diagnosis codes assigned on a claim form during a calendar (or contract) year reported on an inpatient claim, outpatient hospital claims, or physician and certain other health professionals’ claims are counted in determining the total risk score. Not all ICD-10 codes have a risk adjustment assigned to them. Those that do are assigned to groups, and groups have a specific weight.

For Medicare patients to Medicare Advantage plans:

Patient demographics + HCC diagnosis codes = Risk adjustment factor × CMS capitation rate
Diagnosis codes ➡ Diagnosis Groups
Diagnosis groups ➡ Condition Categories, and assigned a risk adjustment factor (RAF)

• Related conditions are assigned in one category and only the most serious is counted.
• Conditions in the same group are counted once. For example, morbid obesity and body mass index (BMI) of 42 are in group 22. The risk score associated with these conditions will only be counted once in calculating the RAF. Clinicians shouldn’t assign all diagnoses assessed at the time of the visit that require or affect patient care or treatment.
• A higher ranked condition causes lower ranked conditions in the same category to be ignored. (There are a few exceptions to this.)
• Unrelated conditions in different categories are both counted, and their effect is additive in assigning a score.

Clinicians should follow ICD-10 rules:

1. Use the ICD-10 Clinical Modification (ICD-10-CM) codes that describe the patient’s diagnosis, symptom, complaint, condition, or problem.

2. Use the ICD-10-CM code that is chiefly responsible for the item or service provided.

3. Assign codes to the highest level of specificity.

4. Do not code suspected diagnoses in the outpatient setting. Code only the diagnosis symptom, complaint, condition, or problem reported. Medical records, not claim forms, should reflect that the services were provided for “rule out” purposes.

5. Code a chronic condition as often as applicable to the patient’s treatment.

6. Code all documented conditions, which coexist at the time of the visit that require or affect patient care or treatment. (Do not code conditions which no longer exist.)

A clinician should document underlying medical problems that require or affect treatment even if it’s not being treated the problem at this visit. For example, a surgeon sees patient with kidney disease, diabetes, and heart disease, sending the patient for preoperative clearance. The patient’s underlying medical conditions affect the surgeon’s treatment of the patient. The surgeon should report these underlying conditions that affect the patient’s treatment. Do not report problems listed in the problem list or past medical history, which are not treated or which do not affect patient care. Related issues: Individual medical practice claims continue to be paid based on the fee associated with the Current Procedural Terminology (CPT®) or Healthcare Common Procedural Coding System (HCPCS) code. Groups that are part of an accountable care organization or other Medicare shared savings program or that have risk-adjusted commercial contracts will see an adjustment in their fees at the end of the contract year, partially based on the acuity of their patient population.

Key points:

• Follow ICD-10 rules when submitting diagnosis codes on claim form.

• Document those conditions treated, assessed, managed, or reviewed and submit the diagnosis codes for those on a claim form.

• Document those conditions that affect the care of the patient, and submit those on the claim form.

• Do not submit diagnosis codes for conditions that no longer exist. Use “personal history of” codes, when accurate.

See also in The Field Guide for Physician Coding, Chapters on Diagnosis coding, ICD-10-CM

All physicians can increase their revenue and improve their compliance through accurate coding.This book tells you how.” –Betsy Nicoletti, MS, CPC

 or call (800) 933-3711 or send an email to for bulk copy information. 

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