Risk adjustment is a modern payment model which uses both demographics and diagnoses to determine a risk score which predicts how costly the individuals care will be for the coming year. This presentation reviews common questions related to HCC scores and how to minimize risk associated with risk adjusted payment models.

1. Healthcare risk adjustment –
Your top ten questions answered

2. 1. What is healthcare risk adjustment?
The most prevalent risk
adjusted model is the CMS
model called hierarchical
condition categories also
known as HCCs.
Risk adjustment is a modern payment model
which uses both demographics and diagnoses to
determine a risk score which predicts how costly
the individuals care will be for the coming year.
Hierarchical condition categories
have been around for a while but
primarily used for Medicare
advantage plans.

3. The idea is to pay more to providers with more
complicated patients. The HCC model
encourages providers and health plans to take
care of more complex patients ensuring that
Medicare beneficiaries receive high quality
care. Payment to providers is based on the
individual’s risk adjustment score.
2. Why did CMS implement HCC methodology?

4. 3. How are risk adjustment scores calculated?
HCCs are similar to DRGs in
that patients are grouped into
categories who are expected
to have similar cost patterns.
Groups of similar diagnoses consume similar resources.
Each HCC is assigned a “weight” that impacts the patient
risk score and determines payment. Two components of
risk factors are used.
The first risk factor is the demographic factor.
The second factor is the HCC risk factor which
is the disease burden component
determined by the individual’s diagnoses.
Each member is assigned a RAF or
risk adjustment factor that identifies
the health status of the patient.

5. 4. What does the demographic component include?
The demographic component includes age, sex, disabled status, eligibility status and
whether the member lives in a community or institution.

6. 5. What does the disease burden component include?
There are more than 3,500
diagnoses codes that affect
the HCC of an individual.
Some of the most common are
chronic conditions including
chronic obstructive pulmonary
disease, vascular disease,
congestive heart failure and
diabetes mellitus.
HCCs are additive meaning
that multiple chronic
conditions result in a higher
total HCC risk factor.

7. More than 75 million
individuals are
currently covered by a
risk adjustment
payment methodology.
6. How many patients are covered under the risk adjustment model
and is there a benefit for the patient?
Under the risk adjustment model, higher-risk
patients are able to find and afford health
insurance.
There is also improved opportunity for patients to
be identified for care management programs or
disease intervention programs.

8. 7. How is diagnoses
data used in the
calculation of risk
adjusted scores?
Diagnoses are reported using ICD-10-CM
codes. Not every diagnosis will “risk adjust,”
or map to an HCC.
Acute illness and injury are not as reliably
predictive of ongoing costs, as are long-term
conditions such as diabetes, chronic
obstructive pulmonary disease (COPD),
chronic heart failure (CHF), multiple sclerosis
(MS), and chronic hepatitis; however, some
risk adjustment models may include severe
conditions relevant to a young demographics
(such as pregnancy) and congenital
abnormalities.
The diagnosis codes are submitted
on claims based on the face-to-face
encounter clinical findings.

9. 8. How can
providers prepare
for payment under
an HCC model?
Providers should audit their documentation ensuring
that the patient’s clinical conditions are fully
described in clinical documentation.
• Monitor and decrease use of unspecified ICD-10
diagnosis codes. Unspecified ICD-10 diagnosis
codes do not fully describe the patient’s clinical
condition.
• ICD-10 coding should also be audited.
• Education and training should be conducted based
on the results of the audit.
• Conducting an annual audit will ensure
documentation and coding accuracies are
sustained.

10. 9. Is it possible for providers to lose
financial opportunities under the HCC
payment program and how can that
risk be minimized?
If medical documentation lacks the accuracy and specificity needed to
assign the most appropriate ICD-10 diagnosis code, providers face the
possibility of reduced payment in a performance-based payment model.
If a chronic condition is not documented yearly, the diagnosis will “fall
off” and not be included in the HCC calculation possibly lowering the
risk adjustment score. Good clinical documentation and accurate ICD-
10 diagnosis coding will paint a complete clinical picture of the patient
allowing the correct RAF score to be calculated and proper payment
received.

11. 10. What are some common risk reduction strategies that can
be implemented for strong performance under the HCC
payment model?
• Document and code all chronic conditions.
• Clarify whether a diagnosis is current or “history of”.
• Update the patient’s problem list regularly.
• The superbill is important but don’t use for code assignment.
• Increase providers’ coding depth.
• Avoid using generic or unspecified codes.
• Link manifestations and complications.

12. Hospitals may think that DRG optimization is a solved
problem, but inpatient coding accuracy for ICD-10 is
only around 61%.
BESLER’s Revenue Integrity Service
can often improve accuracy without
the need to purchase or learn
costly software, potentially increasing
inpatient revenue and reducing
compliance risks.
Watch a short video that explains
how BESLER can help improve
Revenue Integrity at your
hospital
https://www.besler.com/revenue-integrity/