Health Information Management

Accurate hierarchical condition category capture hinges upon accurate physician coding

JustCoding News: Inpatient, January 4, 2012

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by Holly J. Cassano, CPC

Medicare Advantage (MA) plans rely on the Hierarchical Condition Categories (HCC) system for reimbursement. HCC payments are linked to the individual health risk profiles for the members in the plan. MA Plans use ICD-9-CM codes as the primary indicators of each member’s health status. Therefore, it is essential for MA plans to make sure that providers capture the complete diagnostic profile of patients through accurate and complete physician coding. Certified Professional Coders (employed by MA plans) sometimes work with the physician coders (employed by providers that participate in the MA plan) in an effort to ensure this. Coders on both sides of the fence need to have a complete understanding of the HCC process and risk adjustment, as well as the effects on the provider, the member, the MA plan, and overall reimbursement.

Medicare implemented HCC in 2004 to adjust capitation payments to private healthcare plans on the health expenditure risk of their members. Currently, there are approximately 3,000 ICD-9-CM codes in the payment model that map to approximately 87 HCCs. These HCCs dictate the premiums paid to a Medicare Advantage plan.

Accurate HCC capture relies on several different methodologies, including a plan’s ability to obtain accurate ICD-9-CM information about the patient encounter from the provider’s chart, as well as being able to accurately report that information in a timely fashion to CMS.

This has proven to be an overwhelming challenge to the MA plans, due to the fact that physician documentation is sometimes incomplete. It is vital to the plan that the providers ensure they are documenting and coding all chronic disease processes and manifestations that are both active and/or have a history for that member.

Note the following points, which describe HCC logic:

  • Hierarchy logic is imposed on certain disease groups, which is why the model is known as the Hierarchical Condition Category
  • The HCC model is cumulative, meaning that a patient can have more than one HCC category assigned to him or her and each HCC is factored into the member’s risk profile, depending on the number of current chronic disease processes.
  • Disease groups are based on clinically related diagnoses that have similar Medicare cost implications
  • Each disease group relates to a specific ICD-9-CM medical condition (e.g., diabetes and congestive heart failure)
  • Documentation must include “linking statements” for all identified disease manifestations (e.g., “diabetes with peripheral vascular disease manifestations”) to accurately report the chronic disease process that will be linked to the correlating HCC.

Timing of HCC capture is important

MA plans must ensure that they capture HCCs at least once every 12 months. If, however, the HCC codes are not captured within the 12 months (e.g., 12 months and four days), a six-month revenue gap will result for that MA plan.

An article in the January 2008 issue of Managed Care explains how HCC capture often falls off the radar in the provider office when providers are not cognizant that, at minimum, they must annually document these chronic conditions along with any manifestations via a linking statement or else they risk significant negative financial impact:

  • Coronary artery disease
  • Congestive heart failure
  • Chronic obstructive pulmonary disease
  • Cardiovascular disease
  • Diabetes, with any reported manifestations

Documenting these conditions twice per year is highly recommended amongst most MA plans.

Note the following HCC/RxHCC (prescription drug hierarchical condition category) documentation tips for providers:

  • Add any diagnosed HCCs or RxHCCs to both the chronic problem list and the acute assessment.
  • Continually update the chronic problem list.
  • Evaluate each of the HCCs/RxHCCs on a semiannual basis.
  • Review all specialist documentation related to cardiology, master discharge summaries, radiology, specialty correspondence, pulmonary, echocardiograms, and x-rays.
  • Review documentation regarding the patients’ past history template, laboratory results, medications, and previous encounters.

Many MA patients require more than the standard four ICD-9-CM codes that providers are accustomed to recording to accurately reflect their current health status. It is imperative that providers are able to submit more than the standard four ICD-9-CM codes to the MA plans, so that these chronic conditions are captured and submitted to Medicare to achieve correct risk adjusted reimbursement.

Coding example illustrates importance of linking diseases

Consider this example in which a patient has diabetes and peripheral vascular disease (PVD).

A provider sees a member for an annual initial preventive physical examination in January. If the provider’s documentation indicates only diabetes and PVD, then the coder must report ICD-9-CM code 250.00 (uncomplicated type II diabetes) and code 443.9 (peripheral vascular disease, unspecified).

The physician must specify in the documentation that the PVD is a complication of the diabetes. If the physician simply states "diabetes with peripheral vascular disease" or uses similar wording, then the two diseases are considered unrelated. For CMS to consider the manifestation of PVD to be causally related to the diabetes and count as a higher valued HCC of diabetes, the provider must document “PVD due to diabetes.”

Adopt a prospective approach to prevent losing revenue

Many plans leave a significant portion of revenue on the table because they are unable to provide CMS with accurate HCC data collected from providers in the plan, which results in significant financial losses for the plans unless documentation and coding are appropriately addressed by the MA plan with the providers.

For a plan to increase revenue, it should develop an HCC capture strategy from a prospective approach versus a retrospective approach.

A retrospective approach is one in which an MA plan uses algorithms to detect previously unreported diagnosis codes via chart reviews. This generally involves an outside vendor that works for the MA plan. The vendor performs chart extractions and scans the information onto a flash drive for further review.

When an MA plan focuses HCC capture solely from a retrospective approach, the plan risks being exhausted by the tedious nature and high cost of using an outside vendor for large numbers of medical charts.

To achieve a prospective approach, an MA plan should focus on educating the providers in the network to document, complete, and keep updated problem lists that accurately reflect all relevant ICD-9-CM codes for each member encounter. When the provider sees the member one to two times a year, the provider can review the problem list and accurately report all existing chronic disease processes to the MA plan. This prospective approach improves the MA plan’s ability to capture more HCC codes for better reimbursement and eliminates the need for expensive retrospective chart reviews in the future.

Understand guiding principles

Regarding HCC coding, consider the following guiding principles. The risk-adjusted diagnosis must be:

  • Based on clinical medical record documentation from a face-to-face encounter
  • Coded according to the Official ICD-9-CM Guidelines for Coding and Reporting
  • Assigned based on dates of service within the data collection period
  • Submitted to the MA organization from an appropriate risk adjustment provider type and physician data source.

To learn more about HCCs, access the following:

Editor’s note: Holly J. Cassano, CPC, is a clinical documentation improvement specialist for Preferred Care Partners for The Villages, in Lady Lakes, FL. E-mail her at

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