Effectiveness in HCC Coding is Critical for Accurate Patient Risk Scores

Accurate documentation and recapture of Hierarchical Condition Category (HCC) codes are crucial for the financial success of Accountable Care Organizations (ACOs) in Medicare value-based care programs. Effective HCC recapture ensures that patient acuity is appropriately reflected, directly influencing risk scores and an ACO’s financial payments. ACOs that excel in HCC recapture not only secure fair compensation for the populations they care for, but also enhance patient care through precise risk stratification.​

This article explores how understanding your population's health risks and implementing effective HCC recapture strategies can significantly impact an organization's financial stability and ability to provide appropriate care.

How is Patient Acuity Measured

CMS utilizes risk-adjustment scoring to determine patient acuity—a crucial factor that sets cost benchmarks in Medicare value-based care programs. The risk adjustment model translates documented diagnoses into an expected cost of care for patient populations. When diagnoses aren't recaptured, CMS assumes those conditions are no longer present. This means that inaccuracies in HCC recapture could potentially underestimate the resources needed to care for your patients.

Understanding Risk Adjustment

A comprehensive understanding of the risk-adjustment model is essential for ACOs to accurately project revenue and allocate resources appropriately for their patient population.

For example, Medicare Advantage programs' Risk Adjustment Factor (RAF) predicts healthcare costs and adjusts payments based on enrollees' health status. According to Guidehouse, a 1% increase in RAF scores can lead to an average of $141 to $282 per member per year over a standard five-year Medicare Advantage contract. This suggests that even modest improvements in RAF scores can significantly impact revenue.

The RAF score calculation incorporates:

• Demographic factors (age, gender)
• Hierarchical Condition Categories (HCCs)
• Disease interactions
• Medicaid status and disability indicators

How CMS uses Risk-Adjustment Factor

CMS uses RAF scores to:

1. Set budget benchmarks for population health management
2. Ensure fair compensation for organizations managing complex patients
3. Reduce incentives for "cherry-picking" healthier patients

Healthcare providers must document relevant conditions annually—even chronic conditions that persist year after year. According to a Milliman report, "Current risk adjustment rules stipulate that an individual’s HCCs are valid only for the calendar year in which the encounter they are associated with is incurred. Risk adjustment relies on consistent and accurate redocumentation of a patient’s conditions yearly." This underscores healthcare organizations' need to document relevant conditions annually to avoid underestimating patient acuity and facing corresponding financial implications.

What is HCC Coding?

Hierarchical Condition Category coding translates diagnosis codes into risk adjustment factor scores that reflect expected healthcare costs. This system was developed to account for the complexity of resources required to treat different conditions.

Why is HCC Coding Important

HCC coding involves classifying patients' health conditions based on severity and expected healthcare costs. Accurate HCC coding is essential because it directly impacts Risk Adjustment Factor(RAF) scores, affecting reimbursement levels.

In MSSP programs, HCC codes appropriately adjust cost benchmarks to account for patient acuity among ACO beneficiaries. In Medicare Advantage programs, HCC is one factor used to adjust the annual per-beneficiary payment to Medicare Advantage payers.

Identifying and addressing coding gaps ensures that all relevant health conditions are documented, accurately representing the actual acuity of the patient population and securing appropriate funding. While HCC coding is based on claims data, only specific professional claims are considered for HCC calculation. This requires ACOs to monitor non-qualifying claims and appropriately document potential gaps in conditions.         

HCC coding enables:

• More accurate population health stratification
• Better resource allocation for high-risk patients
• Improved care coordination for complex cases
• Appropriate benchmarking for value-based program performance

How HCC Impacts Reimbursement

Understanding and addressing HCC gaps—differences between documented conditions in the current and previous years—is essential. These gaps may arise from conditions that were previously documented but not recorded in the current year, potentially leading to decreased RAF scores and reduced reimbursements. Recognizing the financial implications of these gaps emphasizes the need for meticulous documentation practices.​

Strategies for Effective HCC Recapture

Effective management of patient population health requires a systematic approach to HCC recapture. Organizations leveraging data-driven methodologies consistently identify and document more relevant conditions than traditional methods. One regional ACO, managing over 200,000 lives, faced a ~10% decline in HCC recapture rates. But with Koan Health's Datalyst™ platform, they achieved a 12% improvement in HCC recapture rates and boosted their average HCC risk score by 2.5%. Read their story.

Having early visibility into HCC gaps and focusing on high-impact areas allowed our team to work smarter, not harder. - ACO Executive

Identify Your HCC Code Gaps

The first step in any effective recapture strategy is accurately identifying gaps in your documentation. You need to know precisely where their gaps exist before you can address them. This requires:

• Analysis of patients with visits (with potential HCC gaps/no gaps)

• Identification of patients without visits (with potential HCC gaps/no gaps)

• Confidence in data quality to drive appropriate action

Advanced analytics platforms can assist ACOs in identifying potential HCC code gaps by providing early visibility into coding discrepancies. For instance, data analytics tools can help pinpoint patients who have not had certain chronic conditions documented in the current year despite previous records indicating their presence.

Prioritize Gaps Based on Patient Acuity

Not all HCC gaps are created equal. Focusing on high-impact areas, such as prevalent conditions like diabetes and heart failure, allows ACOs to allocate resources effectively. Targeted interventions in these areas can significantly improve recapture rates and overall patient care.​

Setting Your Recapture Goals

As you approach the year, establishing clear recapture goals based on your population's health status is crucial for success. Set specific recapture goals focusing on HCC categories with the most significant financial impact.  Align with your healthcare providers to conduct Annual Wellness visits (AWVs) to document health conditions. ACOs that prioritize AWVs see higher quality scores, improved risk adjustment, and increased shared savings. Learn the best practices that successful ACOs use to optimize AWV completion rates.

HCC Categories and Suspected Conditions

ACOs may choose different strategies for HCC recapture. Assessing your prior year's performance and the health conditions of your population are critical to establishing your approach.

Core strategies are to focus on patient categories with:

• Largest number of gaps
• Highest health risk conditions
• Suspect conditions

Identifying suspected conditions, such as patients with a BMI over 35 without a documented morbid obesity HCC, can uncover undocumented diagnoses that affect RAF scores.​

Identify Patients with Multiple Gaps

Patients with multiple HCC gaps represent opportunities for substantial improvements in risk adjustment accuracy. Prioritizing these patients with chronic illnesses ensures comprehensive documentation and a more accurate representation of patient acuity.​ Your strategy should incorporate concerted outreach to these high-potential gap members.

Align with Your Physicians

Physician engagement is essential for successful HCC recapture. Effective strategies include:

• Providing patient assessment pre-visit reports highlighting potential HCC gaps
• Embedding "visit notes" in the EMR for providers to check during encounters
• Allowing providers to remove gaps that are no longer active

When physicians understand the importance of accurate clinical and financial documentation, HCC recapture rates can improve dramatically. One of our ACO clients achieved an 83% recapture rate with the above strategies.

Keep Your Providers Engaged

Provider engagement is one of the most significant challenges in HCC recapture. Setting recapture benchmarks at the beginning of the year and establishing clear, achievable HCC-related goals for healthcare providers is essential. Linking these goals to incentive programs can motivate providers to improve their documentation accuracy. Additionally, providing training and education on HCC coding, along with regular performance evaluations, can further enhance provider engagement.    

Use Provider Scorecards

Transparency drives improvement. Provider scorecards that track recapture performance can create healthy competition and highlight areas for improvement. Regularly monitoring and communicating HCC recapture progress through provider scorecards fosters accountability, best practices, and continuous improvement.

Provider Incentives and Training

Strategic incentives aligned with recapture rates or shared savings distribution goals can dramatically increase physician engagement and improve HCC documentation accuracy. Targeted training interventions can also make a substantial difference for practices that underperform.

Ongoing Assessment of Progress

Continuous monitoring of recapture efforts allows ACOs to address outstanding gaps promptly. Industry best practice suggests monthly reviews of progress against targets. Utilizing analytics platforms to track performance over time ensures that strategies remain effective and adapt to evolving CMS requirements.

Realizing Recapture Success

In today's value-based landscape, effective HCC capture isn't just beneficial—it's essential for ACOs to thrive in risk-bearing agreements. - DT Nguyen, CEO & Founder of Koan Health.

Accurate HCC recapture is vital for ACOs aiming to optimize risk adjustment and secure appropriate reimbursement in Medicare value-based care programs. By implementing strategic approaches to identify and prioritize HCC gaps, setting clear recapture goals, engaging providers through incentives and education, and continuously assessing progress, ACOs can enhance financial performance and patient care.

Leveraging advanced analytics platforms provides the necessary tools to navigate the complexities of HCC recapture effectively. At Koan Health, we understand the critical importance of HCC recapture to ACO success. Our comprehensive solutions help organizations:

• Accurately identify potential HCC gaps through sophisticated analytics
• Prioritize recapture opportunities for maximum impact
• Engage physicians through user-friendly tools and actionable insights
• Monitor progress with customized reporting and benchmarking

By partnering with Koan Health, ACOs can transform their approach to HCC recapture—turning a complex administrative challenge into a strategic advantage that benefits their financial health and their patients.

‍

‍

‍