Hierarchical Condition Category (HCC) coding, launched by CMS in 2004, is essential for estimating patient healthcare costs within value-based payment models. It links approximately 10,000 ICD-10 diagnosis codes to 86 HCCs, assigning a risk adjustment factor (RAF) score based on patient demographics and health complexity. Effective HCC coding not only improves claim accuracy and revenue but also enhances the overall patient care experience by considering social determinants of health.

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In 2004, the Centres for Medicare and Medicaid Services (CMS)
launched the Hierarchical Condition Category (HCC)code set. While
approaching its 20th anniversary, HCC coding is becoming more
common as healthcare shifts to value-based payment models, a change
that has been actively pursued over the last decade. HCC, as it is
colloquially known, was created to estimate and possibly predict a
patient’s healthcare costs over the course of his or her life. A Guide on
HCC Coding requires a long-term perspective on multiple conditions,
factors, and determinants that may affect their individual prognosis over
many months or years.
HCC codes are directly related to ICD-10 codes – approximately 10,000
ICD-10 diagnosis codes out of 70,000 diagnoses are directly related to
at least one of the 86 HCCs. HCC coefficients vary depending on the
patient category.

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Based on the patient’s demographics and diagnoses, the HCC model
assigns a Risk Adjustment Factor (RAF) score, which is a relative
measure of how expensive that patient is expected to be. As healthy
patients have a lower-than-average RAF score, revenue from
insurance premiums is transferred from healthy patients to patients
with higher-than-average RAF scores.
According to the “American Academy of Family Physicians,”
“hierarchical condition category coding helps communicate patient
complexity and paint a picture of the whole patient,” allowing for
appropriate quality and cost performance measurement.
In fact, reporting a comprehensive picture of the risk adjustment
factor improves patient score accuracy and, ideally, reduces the need
to request medical records or audit providers’ claims.

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Hierarchical condition category coding is designed to help determine
patient care and long-term health complexity while also “painting a
picture” of the entire patient. Painting a complete picture of a patient’s
health necessitate more than just codes and technology, but also
expertise and analysis.
Healthcare professionals, for instance, should be persuaded to review
the entire patient record, looking for any potential social determinants of
health (SDoH) that could affect the value of the care provided (as in
value-based care).
HCCs use data collected from patient encounters that have been
notated and coded to estimate predicted costs for individuals over time
— in insurance, this could be the next year or more of coverage. These
projections are based on the previous 12 months.

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Capturing HCC diagnoses across the continuum of care to reflect the
total disease burden of a patient population benefits not only the patient
but also physicians and payers. To achieve this goal, providers and
medical coders must stay current on best practices and be educated on
HCC. When done correctly, HCC streamlines the process, resulting in
clean claims and quick reimbursements.
24/7 Medical Billing Services holds a team of well-trained and
experienced HCC coders who are responsible for assigning appropriate
diagnosis codes and CDI specialized to review all clinical documentation
for completeness and accuracy. They also ensure thorough risk
adjustment evaluation for each record in the best interests of the patient,
provider, and payer.

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