Five Urban Legends About Risk-Adjusted Diagnosis Coding

Originally published on kevinmd.com

When I talk to medical practices about Hierarchical Condition Category (HCCs) and risk-adjusted diagnosis coding, I receive a lot of questions that point to the existence of persistent urban legends. Let’s separate fact from fiction.

Don’t miss our Billing Guide on Risk-adjusted Diagnosis Coding for an in-depth look at this topic.

Urban legend #1:  CPT^® fee-for-service coding will be a distant memory when we switch from volume to value

Not anytime soon. Medicare’s newer payment models including Alternative Payment Models (APMs)and Accountable Care Organizations (ACOs) are built on top of fee-for-service coding.

One of the key metrics of success in the ACO model is the cost benchmark. Did the ACO spend more or less than the benchmark in caring for the patients attributed to it? And cost is measured based on—you guessed it–fee-for-service claims submitted for the attributed beneficiaries during the contract year. Medical practices will be submitting claims with CPT and HCPCS codes for the foreseeable future.

Urban legend #2:  Payment for medical services will be based directly on diagnosis coding in the HCC model, like the DRG model

Payment for a claim continues to be paid based on what was done, CPT^® and HCPCS coding.  Some groups may have contracts with capitation, but still submit a fee-for-service claim. Diagnosis coding continues to establish the medical necessity for service.

How does HCC coding matter? The disease burden of the panel of patients is measured through diagnosis codes submitted on claims and will affect the end of year payment reconciliation. HCC coding normalizes this medical risk. That is, it levels the playing field among ACOs, some of which will have sicker and older patients than others. But these risk score are part of the reconciliation along with cost and quality. They are not the basis upon which payments for an individual claim are made.

This is in contrast to how Medicare Advantage plans are paid based on HCCs.  Their payment from CMS depends directly on the HCC codes submitted on claims and on supplemental diagnosis submissions from the MA plan to CMS.

Urban legend #3:  Speaking of quality, your HCC scores measure quality

HCC scores measure the disease burden of individual patients, and the composite of the population of patients.

Urban legend #4:  It’s just another way to game the system

I wrote an article about HCC Coding for the journal of Family Practice Management. A few of the comments posted about the article said this was just another coding game.

Accurately reporting the disease burden of the population of patients in an ACO results in the organization having the money to take care of that group of patients. Acuity, plus cost and quality, will determine the complex calculation related to whether the group receives any end of year savings based on the performance of the ACO.

Of course, in order to share in the savings there must be savings to share. Looking at Medicare’s website, they pointed out that the goal of an ACO is to reduce healthcare spending by rewarding value over volume. However, the goal is not to simply lower cost. The goal is to balance spending and quality and reward good outcomes and high quality care.

The acuity of individual physician’s panels will also be calculated and, in the future, could be used as part of their compensation package. Finally, we’ll know if one physician’s patients really are “sicker” than other physicians’ panels.

Accurate diagnosis coding can result in having the needed resources to care for patients in future years.

Urban legend #5:  There is a simple and straight-line relationship between risk-adjusted diagnosis coding and payment

If only. HCC coding in risk contracts (ACOs, MSSPs, and Alternative Payment Models) is not similar to DRG coding.  In DRG coding, there is a direct relationship between acuity and payment for an episode of care. This is not the case for groups with risk-adjusted contracts.  Shared savings commonly limit the risk adjustment to a fairly narrow corridor (3%) regardless of actual absolute scored differences, creating further distance from the diagnosis score and direct payment amounts.

I’m going to end this article by quoting CMS’s website about ACOs.

“ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high-quality care to their Medicare patients.  The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings it achieves for the Medicare program.”

The role of HCC Coding is to normalize risk in an ACO, not to determine payment.

Many thanks to my friend and colleague Kevin Stone, who proof read this article for me and provided very helpful additions for its improvement.

Additional resources

The CodingIntel Guide to Hierarchical Condition Categories provides a comprehensive list of HCC and Risk Adjusted Diagnosis Coding resources available on CodingIntel.

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