Industry Insights

HCC Coding Increasingly Important in Shift Toward Value-Based Reimbursement

October 2017
Author:  Steve Smith

Steve Smith

Managing Consultant

Consulting

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Kansas City, MO 64106-2246

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As the Centers for Medicare & Medicaid Services (CMS) continues its aggressive shift away from traditional fee-for-service reimbursement and toward value-based reimbursement, practices and organizations must continue examining aspects of care delivery such as volume, cost, referral sources and readmission rates. However, in many instances an aspect of patient care goes overlooked—Hierarchical Condition Category (HCC) coding.

Risk Adjustment Factors (RAF) and HCC coding were implemented in 2003 by CMS. They identify individuals with serious or chronic illnesses and assign a risk factor score to the patient based on a combination of demographic information and reported health conditions. While the patient’s demographic information is fairly straightforward, the patient’s health conditions are identified through ICD-10-CM diagnosis codes submitted by providers on claim submissions. Therefore, they can vary widely based on documentation and coding specificity.

Because CMS assumes there’ll be a higher cost associated with the care of individuals with different chronic conditions, CMS began paying Medicare Advantage Plans on a risk-adjusted basis. Those plans, then, stand to benefit from the improved coding and documentation of the providers with which they contract. Furthermore, providers that accurately reflect patients’ chronic conditions may be able to negotiate better rates with the Medicare Advantage Plans with which they contract.

As an example of how RAFs and HCCs can affect reimbursement, the following table (click to enlarge) illustrates how a health care system may be paid for managing a patient’s care under a Medicare Advantage model based on the available coding and billing when the baseline payment is $750 per patient.

Be aware that not only Medicare Advantage Plans take HCC scoring into consideration. As the industry continues to shift towards value-based reimbursement, Accountable Care Organizations and newly announced payment models may also measure and reimburse providers based on HCC scoring. For example, the Comprehensive Primary Care Plus (CPC+) model, which began in 2017, pays providers a per beneficiary per month (PBPM) payment, which is broken into risk-adjusted quartiles. Those practices that treat a higher-acuity patient base, as determined by the coding submitted on their Medicare claims, will be reimbursed at a higher rate. A summary of the risk-adjusted quartiles under the CPC+ model is shown below.

As the shift to value-based reimbursement continues, it’s safe to assume the acuity of the patients managed by providers will continue to be taken into consideration. Providers and coding professionals need to begin analyzing existing documentation and coding practices to determine areas for clinical documentation and HCC coding improvement and potential reimbursement effect. BKD coding and documentation specialists have a great deal of experience working with health systems and physician practices to help improve clinician engagement, develop internal policies and procedures, streamline internal processes for data collection, perform external coding and documentation compliance assessments and provide education and training on clinical documentation improvement and accurate coding processes. Our specialists can help organizations produce measurable improvements in quality that could result in increased documentation and coding compliance, better financial performance and an increased readiness for new value-based reimbursement models.

Contact your trusted BKD advisor for more information.

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