FAQ's - Hierarchical Condition Categories

(I wrote these FAQ's to share with the physician community in our ACO. Hopefully physicians practicing in other ACO's may also find these helpful.) 

What are HCC’s?

CMS groups certain related diagnoses under a single identifier, which are called Hierarchical Condition Categories (HCC's).

Related Diagnosis HCC Category Risk Adjusted Weight
Esophageal varices w bleed
Esophageal varices w/o bleed
Hepatic coma
Portal hypertension
HCC #25 1.779
Alcoholic Cirrhosis
Cirrhosis of Liver NOS
HCC #26 0.5292

What is the purpose of HCC’s?

HCC’s are used by Medicare and Medicare Advantage (MA) plans for risk adjustment of patients to determine their health/sickness status. Based on this risk adjustment, Medicare & MA plans determine how many dollars will be set aside to take care of patients in the following year. 

E.g. Coding for diseases that fall under HCC #25 tells the payors that the patient is sicker and will require more healthcare resources. The insurance companies will then set aside additional dollars to take care of these patients.

How does this benefit my practice?

Accurately documenting comorbidities allows insurers to use HCC risk adjustment model to set aside more dollars for individual patients in the following year. Under shared savings and risk based contracts, if more dollars are set aside to pay for healthcare, then there is a higher chance that there will be money left over at the end of year that could be distributed to the providers.

E.g. If we code accurately that the patient has “portal hypertension” (HCC #25), in addition to “alcoholic liver disease NOS” (HCC #26), the payors will set aside more dollars to take care of this patient in the next year. This increases the probability that there will shared savings.

How do I ensure appropriate HCC coding?

There are a couple of ways to ensure that we capture all the appropriate information for risk adjustment:

1. Be specific about the diagnosis in your Assessment & Plan and ensure accurate charge capture

E.g. Document the treatment plan for both “Alcoholic Cirrhosis” and “Portal Hypertension”. The treatment plan can be as simple as – “Stable, No medication changes.” Ensure that the ICD codes for both these diagnoses are captured on the bill that is sent to insurance companies. 

2. Document and bill every year that the patient still has the diagnoses, even if the treatment will not change. This ensures that the insurance companies will continue to factor the diagnoses when calculating payment for the next year


Year Diagnoses documented & billed Risk Adjustment Calculation for Next Year
2014 Alcoholic Liver Disease
Portal Hypertension
2015 Alcoholic Liver Disease 0.5292
2016 (Dollar allocation for 2016 may be lower than in 2015 as "portal hypertension" was not documented in 2015)

Based on the documentation/bill in 2014 (in the table above), the dollar allocation by insurance companies for 2015 is higher. However, the risk adjusted dollar allocation for 2016 may be lower as “portal hypertension” was not documented and billed in 2015.