The Essential Functions Of HCC Coding And Risk Adjustment

Essential Functions Of HCC Coding

HCC or hierarchical condition category coding is a specific type of coding directive established with Medicare Advantage and some types of Medicaid plans. It is a critical component for risk-bearing providers as compliance with HCC and risk adjustment is a requirement in the revenue cycle for these facilities and healthcare organizations.

The HCC codes recently changed, and that change coincided with the decrease in staffing and the increase in hospitalizations, particularly for older Americans. This created a crisis for many healthcare organizations to adjust to the new HCC coding requirements. This, in turn, led to problems with diagnosis and comorbidity documentation using the latest and correct HCC codes.

HCC coding and risk adjustment is essential to understanding patient complexity and painting a picture of the whole patient. In addition to guiding health care resource utilization, RAF scores are used to risk adjust quality and cost metrics.

The hierarchical condition category (HCC) coding system helps communicate patient complexity by grouping patients into categories based on the extent of their illness. This system also allows for comparisons between hospitals and allows for more accurate predictions of health care resource utilization. RAF scores are used to risk adjust quality and cost metrics, which is why HCC coding is so important.

HCC coding can be a great tool for decision making, as it provides a snapshot of the patient’s healthcare needs at a specific point in time. By understanding the patients within each category, hospitals can better allocate resources and make decisions that will best serve their patients.

The New HCC Codes Impact on the Revenue Cycle

New HCC Codes Impact on the Revenue Cycle

The purpose of the new HCC codes is to provide the link to the RAF or risk adjustment factors for the individual patient. This is a risk score that is calculated based on the current health condition, symptoms, and the specific age and other demographics for the patient. This RAF and the associated HCC codes are all incorporated into the Centers for Medicare and Medicaid Services model.

The lower the risk score for the individual, the lower the compensation for the healthcare organization. On the other hand, the higher the risk score, which is again based on the current HCC codes, the higher the compensation.

To make matters more complicated, every January 1st, the Centers for Medicare and Medicaid Services (CMS) resets the risk score for each patient with Medicare Advantage or other specified types of Medicaid coverage. This reset levels all patients to a healthy risk adjustment factor until new codes are entered into future reimbursement claims.

Risk Adjustment Validation Audits

HCC coding

The CMS performs Risk Adjustment Validation Audits to check on the validity of the coding on reimbursement claims. If there are errors in the HCC coding, or if there is an incorrect or incomplete diagnosis, there is a delay in processing the reimbursement claim.

This is not just a disadvantage for the healthcare organization, and it can also directly impact the patient’s ability to see their PCP and specialists. If the HCC coding is incorrect or the diagnosis codes are inaccurate or incomplete, the patient may not have coverage to see their physicians. This can result in the need to directly contact the patient, which can create problems for the primary care physician and the specialist, particularly among the elderly population.

Healthcare effectiveness data and information (HEDIS) set standards that are not met can result in penalties for non-compliance. In addition, it may result in the need for another patient in-person visit with the provider to bring the diagnosis and documentation up to the HEDIS standards.

This is not a small issue. In a study by Health Leaders, it was determined that a primary care physician could add up to $210,000 in services, $86,000 in coordination services, and $124,000 in preventative services per year if errors in coding and billing issues due to incomplete and inaccurate data were corrected.

Moving Forward

Moving Forward

One of the most effective and efficient solutions to address the HCC-risk adjustment model coding challenge is to outsource their HCC coding, risk adjustment, and technology to a dedicated company.

This solution is highly effective in terms of costs and labor. Working with a partner that is already compliance-focused and implementing current HCC coding with resulting accurate RAF predictors eliminates the need to attempt to complete this process in-house. The amount of time and resources needed to bring many healthcare providers up to the level of technology to link systems to effectively manage the process is cost and time prohibitive.

The movement from fee-for-service to value-based medical care is another driving factor for this need to be in compliance with new HCC coding requirements. Partners that can manage the process and have the required documentation streamline the process for the healthcare facility or provider while ensuring compliance with current and all future changes from CMS.

Patient care will also benefit from these types of partnerships. With greater accuracy in capturing data from the patient’s EMR, issues with existing documentation become available in real-time, leading to more complete and accurate diagnosis and patient care.


Coding is an essential part of the healthcare field, and understanding how to properly code your patients is crucial for providing the best possible care. One of the most important coding systems used today is hierarchical condition category coding (HCC), which helps communicate patient complexity and paint a picture of the whole patient. RAF scores are also important, as they are used to risk adjust quality and cost metrics. So if you want to stay ahead of the curve in terms of providing high-quality care, be sure to understand how HCC coding and RAF scoring work!