What Is HCC Coding And Why Is It Important?

While value-based healthcare is one of the fairest healthcare delivery models around, it’s not without its challenges. Yes, it’s designed with the patient in mind, minimizing the costs of healthcare and improving patient outcomes. Still, the cost and utilization in this system may be complex to navigate.

This is because the healthcare providers cannot rely on the sheer volume of delivered services to get paid in the value-based healthcare model. They’re compensated based on the health outcomes of the patients. Another component in the amount of the payment is also the complexity of the patient group for which healthcare services are provided.

In other words, the annual complexity account has a great impact on the value of the payment to providers, which is why it’s imperative to accurately describe the true complexity of patients to the insurance companies.

This can all be accomplished through HCC coding.

HCC Coding Defined

What is HCC coding can be answered by breaking down the acronym. HCC stands for hierarchical condition category and in the basic sense, it’s just a risk-adjustment prediction model.

It was designed to predict risks and estimate the lifetime healthcare costs of the patient by considering different factors, determinants, and conditions that may impact the individual prognosis of the patient over a longer period.

Because the healthcare industry is slowly shifting towards value-based models, the use of HCC coding is also becoming more and more prevalent. The coefficient of HCC changes depending on the category of the patient. The patients are assigned risk scores by connecting the set of HCC codes to different demographic factors.

An extra layer of complexity in the whole question of what is HCC coding is the fact that it also allows for assigning a risk adjustment factor (RAF) score to patients. Risk-adjusted payments, in simple terms, mean that the payer pays more for unhealthy patients and less for healthy patients. This ensures that the insurance company is unable to profit by dropping unhealthy patients.

Thus, a patient with multiple chronic ailments will have higher long-term costs, while ones with not as many health conditions will have lower average expenses.

HCC codes are based on ICD-10-CM codes and are supplied by providers to Medicare or health plans. 

The ICD-10 codes correlate to medical diagnosis and there are over 10.000 of them. Each reflects specifics of a different medical condition. While HCCs are similar to ICD-10 codes, not every code is tied to an HCC. 

Why Is It Important?

Now that you know what is HCC coding, it’s time to explain its importance. HCC coding is a great way to paint a full picture of not only the long-term complexity of treatment but also the entire health of the patient.

For instance, providers are encouraged to examine the patient record and discover any societal health determinants in order to predict outcomes that may change the value of the provided care.

The RAF score also plays a part in determining the cost metrics and risk-adjusted qualities as they account for the differences in the complexity, cost performance, and quality of an individual patient. Additionally, demographic information and conditions documented in the patient encounter are also tracked in the RAF score.

The payments to providers are based on the anticipation of risk of patients with chronic health ailments and are calculated from specified ICD-10 codes. Failure to accurately describe and note the full extent of the patient's condition through proper coding means risking a  substantial loss of revenue. 

Processing HCC Coding

ICD-10 codes require additional detail regarding the individual care of a patient and their medical conditions. This also applies to chronic conditions and their management such as alcohol dependence or artificial openings. Both examples may predict future healthcare needs. They also apply to HCCs and may accurately predict the future well-being of the patient.

Risk factors such as the previous two are taken into account when determining the pay scale of the patient. The more of these conditions that a patient suffers from, the risk to their health is higher. Patients who are less healthy than average have an HCC score higher than 1000, while the healthier ones have a score that’s under 1000. 

Yet, mistakes can happen and providers often miss the opportunity to specify HCC in different scenarios, which leads to risk scores that aren’t painting the full picture.

How to Make HCC Coding a Success

Most problems arise from providers who assign codes directly at the end of each patient encounter without the necessary knowledge of ICD-10 codes. For example, providers may not be fully familiar with all the coding guidelines, encoders, or coding resources.

It’s also worth mentioning the coders themselves, as their experience and credentials have a big effect on outcomes. This is because success with HCC coding requires expertise in ICD-10 codes.

Furthermore, the successful processing of HCC coding and documentation is important for financial integrity, maintaining compliance, and accurate quality measures. As such, organizations should take extra care when evaluating outpatient documentation. They should also proactively find areas where they could actively improve coding quality regarding HCCs.

While coder and provider experience and insight matter, many organizations are seeing good results by introducing technology into the process.

Tech may improve the capture of documentation, and it’s also possible to partially automate coding with computer-assisted coding solutions. The same applies to simplifying clarification and follow-up encounters with digital clinical documentation software.

Medical Coding Matters

In the days before risk adjustment factors were common, reimbursement hinged solely on demographic factors. Nowadays, organizations can rely on HCC coding which is at the core of revenue management. It’s true that demographics still influence the risk scores, but now they’re calculated equally and consistently. 

HCC coding also presents unique opportunities for providers to start with efficient approvals and reimbursements - things that play a major role in the profitability of the medical practice.

However, knowing what is HCC coding is just the beginning of an organization-wide effort to improve. Since it plays such an important role in the revenue cycle of a healthcare organization, you should take extra care with your HCC coding efforts.

This means you have to make sure that your coding is accurate, efficient, and secure as this is the only way to achieve compliance and a healthy stream of revenue.