HCC coding based calculations for risk adjustment - examples

 

The Hierarchical Condition Category (HCC) coding system plays a crucial role in risk adjustment, especially in programs like Medicare Advantage, where payments are adjusted based on the health status of individuals. The process involves identifying relevant diagnoses, mapping them to HCC codes, and aggregating HCC scores to calculate an individual's overall risk score.

 

# Examples of HCC Code Allocation:

 

1. Diabetes Mellitus:

   - Diagnosis: Diabetes with complications

   - HCC Code: HCC 19: Diabetes with Complications

 

2. Chronic Kidney Disease:

   - Diagnosis: Stage 4 Chronic Kidney Disease

   - HCC Code: HCC 12: End-Stage Renal Disease

 

3. Congestive Heart Failure:

   - Diagnosis: Congestive Heart Failure

   - HCC Code: HCC 85: Heart Failure

 

4. Rheumatoid Arthritis:

   - Diagnosis: Rheumatoid Arthritis with complications

   - HCC Code: HCC 35: Rheumatoid Arthritis with Complications

 

5. Chronic Obstructive Pulmonary Disease (COPD):

   - Diagnosis: Severe COPD

   - HCC Code: HCC 108: COPD, Asthma, and Other Chronic Respiratory Disorders

 

6. Diabetes with Cardiovascular Disease:

   - Diagnoses: Diabetes with complications, Cardiovascular disease

   - HCC Codes: HCC 19: Diabetes with Complications, HCC 86: Cardiovascular and Cerebrovascular Disease

 

7. End-Stage Renal Disease with Hypertension:

   - Diagnoses: End-Stage Renal Disease, Hypertension

   - HCC Codes: HCC 12: End-Stage Renal Disease, HCC 80: Hypertension with Complications

 

8. Stroke with Paralysis:

   - Diagnoses: Stroke with paralysis

   - HCC Code: HCC 109: Stroke

 

9. Cancer with Metastasis:

   - Diagnoses: Cancer with metastasis

   - HCC Code: HCC 11: Metastatic Cancer

 

10. Dementia with Behavioral Disturbance:

    - Diagnoses: Dementia with behavioral disturbance

    - HCC Code: HCC 51: Alzheimer's Disease and Related Disorders

 

11. Depression with Suicide Risk:

    - Diagnoses: Major depressive disorder, Suicide risk

    - HCC Codes: HCC 59: Major Depressive, Bipolar, and Paranoid Disorders, HCC 54: Suicide risk

 

B.  Final Risk Scores:

 

1. Diabetes Mellitus:

   - HCC 19: Diabetes with Complications (Weight: 0.236)

   - Final Risk Score: 0.236

 

2. Chronic Kidney Disease:

   - HCC 12: End-Stage Renal Disease (Weight: 0.765)

   - Final Risk Score: 0.765

 

3. Congestive Heart Failure:

   - HCC 85: Heart Failure (Weight: 0.183)

   - Final Risk Score: 0.183

 

4. Rheumatoid Arthritis:

   - HCC 35: Rheumatoid Arthritis with Complications (Weight: 0.431)

   - Final Risk Score: 0.431

 

5. COPD:

   - HCC 108: COPD, Asthma, and Other Chronic Respiratory Disorders (Weight: 0.334)

   - Final Risk Score: 0.334

 

6. Diabetes with Cardiovascular Disease:

   - HCC 19: Diabetes with Complications (Weight: 0.236)

   - HCC 86: Cardiovascular and Cerebrovascular Disease (Weight: 0.195)

   - Final Risk Score: 0.431

 

7. End-Stage Renal Disease with Hypertension:

   - HCC 12: End-Stage Renal Disease (Weight: 0.765)

   - HCC 80: Hypertension with Complications (Weight: 0.258)

   - Final Risk Score: 1.023

 

8. Stroke with Paralysis:

   - HCC 109: Stroke (Weight: 0.696)

   - Final Risk Score: 0.696

 

9. Cancer with Metastasis:

   - HCC 11: Metastatic Cancer (Weight: 2.204)

   - Final Risk Score: 2.204

 

10. Dementia with Behavioral Disturbance:

    - HCC 51: Alzheimer's Disease and Related Disorders (Weight: 0.429)

    - Final Risk Score: 0.429

 

11. Depression with Suicide Risk:

    - HCC 59: Major Depressive, Bipolar, and Paranoid Disorders (Weight: 0.153)

    - HCC 54: Suicide risk (Weight: 0.206)

    - Final Risk Score: 0.359

 

These final risk scores represent the predicted health costs associated with each patient based on the assigned HCC codes and their respective weights. The actual coefficients used in the official risk adjustment models may vary, and the final risk score calculation involves summing up the weighted values for all relevant HCCs present in a patient's medical profile.

Components of the Calculation for adjusted payments:

1. Base Payment Rate:

   - The base payment rate is a predetermined amount that serves as the starting point for reimbursement. It represents the average expected cost of providing healthcare to an average or "typical" patient.

   - For example, let's use a base payment rate of $10,000.

2. Final Risk Score:

   - The final risk score is derived from the aggregation of Hierarchical Condition Category (HCC) codes and their associated weights. It quantifies the expected healthcare costs based on the patient's specific health conditions.

   - For example, if the final risk score is 0.431, it means the patient's predicted healthcare costs are 43.1% higher than the average patient.

# Calculation Steps:

1. Multiply Base Payment Rate by Final Risk Score:

   - The adjusted payment is calculated by multiplying the base payment rate by the final risk score.

   - Formula: Adjusted Payment = Base Payment Rate * Final Risk Score

2. Example Calculation:

   - Using the given example:

     - Base Payment Rate = $10,000

     - Final Risk Score = 0.431

     - Adjusted Payment = $10,000 * 0.431 = $4,310

# Interpretation:

The resulting adjusted payment of $4,310 represents the modified reimbursement amount that accounts for the patient's health complexity and expected healthcare costs. This adjusted payment ensures that healthcare providers receive compensation that aligns with the anticipated resource needs associated with managing the patient's specific health conditions.

# Key Considerations:

1. Weighted Impact of HCCs:

   - The final risk score is a composite measure that considers the weighted impact of each HCC code associated with the patient's diagnoses. Each HCC has a specific weight or coefficient that reflects its contribution to healthcare costs.

2. Fair Compensation:

   - The goal of this adjustment is to provide fair and accurate compensation to healthcare providers, considering the varying health needs of patients. It helps avoid underpayment for patients with complex health conditions and encourages providers to manage patients comprehensively.

3. Precision in Risk Assessment:

   - The precision of the risk assessment and coding process is crucial. Accurate coding of diagnoses ensures that the resulting risk score reflects the true health status of the patient.

4. Dynamic Nature of Risk Adjustment:

   - Risk adjustment is a dynamic process that may be updated periodically to reflect changes in the patient's health status. This ensures that reimbursement remains aligned with the evolving healthcare needs of the population.

In summary, the calculation of adjusted payments is a fundamental aspect of risk adjustment in healthcare reimbursement. It aims to provide a fair and equitable compensation structure that considers the complexity of patients' health conditions, as indicated by their HCC-derived risk scores.