Talk About a Mouthful: Risk Adjustment and Hierarchical Condition Category (HCC)

November 8, 2020

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Hierarchical Condition Category (HCC) is a payment model the Centers for Medicare and Medicaid Services (CMS) mandates. It was written into law in 1997 and implemented in 2004. CMS-HCC identifies Medicare Managed Care beneficiaries with serious or chronic illnesses. It assigns a risk factor score to the person based on a combination of the individual’s health condition(s) and demographics.

The cost to physician practices caring for patients enrolled in Medicare Advantage (MA) Plans can be high for those practices that do not master the CMS-HCC coding model. Medicare Physician Group Practice (PGP) demonstration site shows a combined savings of $171 per person per year. Additionally, Medicare will pay bonuses to the participating PGPs. These bonuses averaged $102 per beneficiary per year. Reports show that 27% of all Medicare beneficiaries are enrolled in a Medicare Advantage plan, which could lead to substantial savings if done correctly.


In April 2014, CMS issued guidance that called for payment reductions ranging from 1.9% to 3.65% in rates paid to MA plans. These reductions had physicians brace for the impact. One of the best ways to minimize the impending revenue decline is to focus on HCC coding.

Clear and complete documentation is vital to ensure accurate reimbursement for medical services regardless of the payer; however, it is even more important in the CMS-HCC model. CMS requires that documentation by a physician or other qualified provider:

  • Support the ICD-10 codes billed.
  • Fully encompass the presence of all conditions.
  • Include the provider’s assessment of the patient.
  • Include documentation addressing medical management and decision making related to these conditions. CMS indicates that the documentation of each condition must be noted at least annually for the condition to be active.

The CMS-HCC logic:

  • Applies to certain disease groups
  • Is cumulative (i.e., a patient can have more than one HCC category assigned and each HCC is used in the risk profile)
  • Uses disease groups that are based on clinically related diagnoses and have similar Medicare cost implications
  • Relates each disease group to a specific ICD-10-CM medical condition

It is critical for practitioners to focus on accurate and timely documentation of all data relating to the patient’s overall condition. Our experience shows that the practitioner’s documentation often does not capture the conditions that apply to the disease groups that drive the HCC coding. Additionally, we have found that a patient typically has more than one HCC category assigned; however, the documentation does not always support the multiple categories. This missing documentation will drive the score and ultimately impact the payment.

Additionally, if the practitioner does not document chronic conditions annually and provide linking statements for disease manifestations, such as diabetes with diabetic neuropathy, the physician and practice may experience a significant financial impact. During one of our reviews, we identified that improving the practitioner’s documentation slightly would have increased the HCC risk-adjusted score. In this case, we found that the lack of appropriate documentation had a $34,700 impact in a sample of 837 claims. We found that there was an approximate $116,960 impact annually, across just one practice (not taking the bonus potential into account).


Our experience with HCC coding has allowed us to identify challenges that the provider community faces:

  • With the implementation of the Electronic Medical Record (EMR), documentation has become automated. It is important that the following be considered:
    • Does the EMR provide a cut/paste function and if so, ensure it is not overused?
    • Are the physicians choosing the correct field in the drop-down list?
    • Have the physicians received training on the EMR?
  • Physicians must change their mindset by focusing on the documentation of conditions and comorbidities and not just diagnosis codes.
  • Specificity is imperative in HCC documentation and coding (i.e., “patient has Type II Diabetes Mellitus with diabetic polyneuropathy”).
  • Does the EMR have “pick lists” and if so, are they used in place of documenting actual observations?

For those practices that still use a paper record, ensure that ongoing chronic disorders are documented at least annually. Remember, if it was not documented, it was not done, and it cannot be coded.

Finally, helping physicians understand that documentation is as important as the medical care they provide is invaluable. If reimbursement is tied to the physician’s income, it is easier to engage the physician. Make sure they have some skin in the game!


The keys to success are listed below:

  • Leverage an accurate, up-to-date and consistent problem list to identify your diseased-patient populations with increased accuracy.
  • Update and standardize the problem list, chronic conditions and active diagnoses at least annually with the most accurate, specific diagnoses for each patient.
  • Encourage physicians to use the words “due to,” “with” and/or “caused by” for each diagnosis to help document the causal relationships of conditions. They should ask themselves, “Can I be more specific?”
  • Document to the highest level of specificity. Utilize ICD-10 clinical concepts:
    • Type — temporal factors
    • Cause by/contributing factors — symptoms/findings/manifestations
    • Localization/laterality — anatomy
    • Associated with severity
    • Episode remission status
    • History of morphology
    • Complicated by  external cause
    • Activity place of occurrence
    • Loss of consciousness number of gestations
    • Outcome of delivery body mass index
  • Do not use the words “history of” or place a diagnosis under Past Medical History unless the condition is completely resolved.
  • Support documentation of conditions for increased specificity, for example: stable, controlled, uncontrolled, poorly controlled, improving, worsening, etc.
  • Use MEAT (measured, evaluated, addressed, treated) criteria to differentiate a current diagnosis requiring resources from a problem list of all potential problems the patient has ever experienced.
    • MEAT must be specific.
    • MEAT can be negative; no rales, no rhonchi noted.
    • MEAT must be found on the same date of service.
    • MEAT can be found almost anywhere in the chart.
  • Encourage physicians to make a note when they review and update the patient’s medication list. This allows coders to use the medication list as MEAT.
  • Discourage physicians from documenting using only diagnoses codes. Diagnoses codes cannot be coded and diagnoses codes are not considered documentation.
  • Document comorbidities as most are additive to the risk.
  • All existing chronic conditions should be documented in the medical record and have an assessment and a plan of care; balance the assessment and the plan of care.
  • Ensure documentation supports the coded HCC conditions, and MEAT is achieved.
  • If the physician documents specifics, but selects a generic code from the EMR, update the code.
  • Do not down code if a causal relationship is documented, code it.
  • Do not up code if the physician does not document specifics, you cannot code for a specific diagnosis.
  • Review orders and documentation prior to the electronic signature.

Additionally, to obtain the highest possible HCC score, it is imperative to include the HCC Diagnosis Targets and in the Prescriptive HCC Common Targets in the documentation when present.


In an era of accelerating medical costs and reduced payments from CMS, concentrating on HCC coding and documentation is one of the best ways to eliminate gaps in care and ensure money isn’t being left on the table. You can achieve this with the right focus and tools.

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