HCC Coding Basics: Run a Better Practice

HCC coding is like the secret code for clinicians to get paid fairly for treating their patients. Although they aren't new, HCC codes are becoming more common in value-based care models. Since billing with HCC codes can result in higher reimbursement rates, it's worth learning about them.

What Is HCC Coding?

HCC stands for hierarchical condition category, a system used in healthcare to categorize and group patient conditions for risk adjustment in payment and reimbursement models.

HCC codes are a subset of ICD-10 codes, which codify medical problems based on electronic medical records. All medical conditions — such as the flu or type 2 diabetes — have an associated ICD-10 code. When medical practices work with a payer who will pay them shared savings — a type of risk — they can use HCC codes to weight patients' conditions based on how sick they are.

HCC codes have a score and a weighting associated with them, leading to a total risk adjustment factor (RAF). The higher the risk score, the higher the potential reimbursement rate. The codes allow for a more accurate reflection of the cost of care for patients with multiple chronic conditions and help ensure that patients with more complex medical needs receive adequate resources for their care.

Why Is HCC Coding Important?

Using HCC codes in an EMR helps ensure that patients with multiple chronic conditions receive appropriate resources for their care and that clinicians receive fair and accurate payments for the services they provide. This helps reduce costs and improve the overall efficiency of the healthcare system.

For example, a patient with multiple chronic conditions, such as diabetes, heart disease, and high blood pressure, would be assigned multiple HCC codes, resulting in a higher risk score and a higher prediction of the cost of care.

Who Uses HCC Codes?

Medicare Advantage plans — private health insurance plans contracted with Medicare to provide coverage to Medicare beneficiaries — Accountable Care Organizations (ACOs), some Affordable Care Act (ACA) plans, and many other plans use HCC codes.

Many of these plans use HCC codes to categorize and group patient conditions, predict the cost of care for their beneficiaries, and adjust payments to healthcare providers based on the health status of their patients.

In addition to healthcare plans, HCC codes are also used by healthcare providers, including hospitals, clinics, and individual practitioners, to report patient diagnoses in their EHR and medical conditions to payers, such as private insurance companies and government programs like Medicare.

What Is the Role of RAF in HCC Coding?

A risk adjustment factor (RAF) is a value used in calculating reimbursement rates for healthcare insurance plans. The RAF aims to account for differences in patient health status so that plans covering sicker patients receive higher reimbursement rates to account for the higher cost of caring for those patients.

In the context of HCC coding, the RAF is used to determine the level of risk adjustment for a given patient. The RAF value adjusts the reimbursement amount based on the patient's HCC category. The higher the RAF value, the higher the level of risk adjustment, and therefore the higher the reimbursement amount for the healthcare insurance plan.

Why Are HCCs Important for Reimbursement?

HCCs are essential for proper reimbursement because they determine the payment a clinician will receive for treating a patient with a specific medical condition.

HCCs categorize patients into different groups based on their health status and expected healthcare utilization, and each group is assigned a specific risk score. Payers use this risk score to determine the reimbursement the provider will receive. With HCCs, payers can fairly reimburse clinicians for the care they provide, and they can allocate resources efficiently.

How Does ChartPath Help?

ChartPath is a platform that provides software solutions to support healthcare professionals in their coding and electronic health records documentation processes. In ChartPath, we've highlighted the HCC codes and the associated category to make it easy for you to select the right one.

To adjust the RAF, you have to bill HCC codes. If you have one condition, you may have five codes to select from, and ChartPath will show which one is an HCC code. You can choose the HCC code instead of a non-HCC code for optimal reimbursement.

In an interesting quirk, Medicare assumes patients start fresh without any health problems at the beginning of the year — at least in their reimbursement process. While we love the notion of "new year, new you" as much as anyone, we realize that most patients don't magically recover at midnight on New Year's Eve.

Since clinicians have to reassign HCC codes to their patients every year to qualify for Medicare payments, ChartPath tells you which codes you billed last year. This feature makes it easy to reassign them this year if they're still relevant. To find out how ChartPath makes HCC coding and other aspects of running your practice simple, reach out to schedule a demo.