Measuring the effect of HCCs, part 1

Editor’s note: This article originally appeared in the Revenue Cycle Advisor. For more information about Hierarchical Condition Categories (HCCs), read this article from the CDI Journal by Gloryanne Bryant, RHIA, RHIT, CCS, CCDS. To read the second part of this article, come back to the blog next week. The views expressed do not necessarily represent those of ACDIS or its advisory board.

Evolving reimbursement methodologies and regulations can make it difficult for an organization to prepare for the future. Some may choose to stick to current processes but savvy organizations should be looking ahead. Risk-adjusted and value-based models are the future of reimbursement, for both commercial and government payers. Organizations must keep the doors open today while building a solid foundation for the years to come.

These changes and challenges require organizations to pay attention to a sometimes neglected coding topic: hierarchical condition categories (HCC). HCCs are the basis for risk adjustments for reimbursement models like Medicare Advantage, accountable care organizations (ACO), and other value-based purchasing measures such as Medicare Spending Per Beneficiary. Poor understanding and application of HCCs mean that a hospital’s patients may be much sicker in reality than they appear to be on paper. And that will hit reimbursement hard.

Because HCCs generally apply to only certain patient populations, identifying those patients from the start can help focus efforts. Work with information systems, EHR vendor, and front desk staff to ensure an understanding of the financial classes or insurance plans for Medicare Advantage patients. It can sometimes be difficult for a provider organization to pin down the impact of HCCs because it’s less straightforward than other models, says Monica Pappas, RHIA, president of MPA Consulting, Inc., in Long Beach, California. Medicare Advantage payments are calculated once a year and the rate is set by CMS, communicated to the payer, and then to the provider via contract.  “The complexity comes from the fact that all of the hospital’s inpatient and outpatient data, plus the professional data is merged at the health plan and then scrubbed and ultimately submitted to CMS,” says Pappas

CMS analyses the data. The agency then determines what the yearly payment will be for a patient based on that patient’s particular set of aggregated data.

Some organizations may not even be aware of how HCCs affect Medicare Advantage payments, says James P. Fee, MD, CCS, CCDS, vice president of Enjoin, Collierville, Tennessee and a hospitalist at Our Lady of the Lake Regional Medical Center in Baton Rouge, Louisiana. If an organization did not have a risk-bearing contract with its Medicare Advantage payer, it didn’t need to know about HCCs. The onus would be on the payer to drive risk scores to determine capitated rates and prospective payments with CMS for the fiscal year. But new reimbursement models are changing the game for providers. Health Care Options (HCO), ACOs, and the Merit-based Incentive Payment System (MIPS) all use HCC risk adjustments. Providers taking part in these programs are suddenly getting interested in HCCs, Fee says, but they may have more to learn than they realize.

“HCCs are going to be the next greatest impact for CDI, whether that be determining a capitated rate and prospective payment models such as Medicare Advantage, to some of the next gen ACOs and ACOs in general,” Fee says. “HCCs run the gamut if you look at the industry in general. It’s a changing world for organizations because if you haven’t been in this space then you’re not quite aware.”