HCC coding is a risk-adjustment model originally designed to estimate future health care costs for patients. The Centers for Medicare & Medicaid Services (CMS) HCC model was initiated in 2004, but it is now becoming increasingly prevalent as the environment shifts to value-based payment models.

HCC relies on ICD-10 coding to assign risk scores to patients. Each HCC is mapped to an ICD-10 code. Along with demographic factors such as age and gender, insurance companies use HCC coding to assign patients a risk-adjustment factor (RAF) score. Using algorithms, insurances can use a patient’s RAF score to predict costs.

For example, a patient with few serious health conditions could be expected to have average medical costs for a given time. However, a patient with multiple chronic conditions would be expected to have higher health care utilization and costs.

Why is HCC coding important?

HCC coding helps communicate patient complexity and paint a picture of the whole patient. In addition to helping predict health care resource utilization, RAF scores are used to risk-adjust quality and cost metrics. By accounting for differences in patient complexity, quality and cost performance can be more appropriately measured. To illustrate, consider these examples:

Example #1: A 68-year-old patient with type 2 diabetes with no complications, hypertension, and a body mass index (BMI) of 37.2

E11.9 Type 2 diabetes with no complications
I10 Hypertension
Z68.37 BMI of 37.2
Total Risk = 0.000

Example #2: A 68-year old patient with type 2 diabetes with diabetic polyneuropathy, hypertension, morbid obesity with a BMI of 37.2, and status post-left below-knee amputation (BKA)

E11.42 Type 2 diabetes with diabetic polyneuropathy 0.0368
I10 Hypertension
E66.01 & Z68.37 Morbid obesity with a BMI of 37.2 0.365
Z89.512 Status post-left BKA 0.779
Total Optimized Risk = 1.1808

Appropriate coding can give a more reliable risk score. Try not to use “unspecified” codes. Of note, chronic kidney disease (CKD) stages 1-3 do NOT increase risk – only stages 4-5 and ESRD. If you’d like more information on this topic, call 732-428-7025.

James J. Matera DO, FACOI