HCCs and Risk Adjustment: Never a Coding Issue, Always a Documentation Issue

HCCs and Risk Adjustment: Never a Coding Issue, Always a Documentation Issue

The first lesson coding professionals are taught goes back to the days of Medical Records 101, when students are eager to learn about the HIM world. Even before breaking in those fresh new coding manuals and meticulously filling every nook and cranny ad nauseum with notes and highlights, most health information management (HIM) professors and mentors sternly advise students: “If it isn’t documented, it didn’t happen; If it didn’t happen, don’t document it!” This very simple-yet-crucial lesson, carried by many HIM professionals post-graduation, comes to mind when thinking about Risk Adjustment and Hierarchical Code Conditions (HCCs).

Risk adjustment methodology is nothing new within the coding realm, and HCCs were first implemented by the Centers for Medicare and Medicaid Services in 2004 as a payment model that adjusts for risk and severity of illness (SOI). This form of coding is mainly used by Medicare Advantage providers and was designed as an actuarial tool that accounts for the costs of providing long-term care for patients with chronic illness. HCCs have become a heated topic of late due to discrepancies in industry standards and conflicting advice from competing organizations when it comes to compliance and ensuring that the documentation supports the HCC.

At Tuesday’s convention session titled “Tracking Risk Adjustment Across the Continuum of Care: A Patient Tracer,” presenter Laura Legg, RHIA, CCS, CDIP, AHIMA-approved ICD-10-CM/PCS Trainer, the strategic solutions director at Besler, discussed how the documentation must tell the complete story of the patient encounter to trace the patient’s chronic conditions throughout the healthcare continuum. This allows healthcare plans to properly assess the risk of caring for that patient and ensure proper reimbursement. Legg described how HCCs are akin to case mix index and DRGs, where patients are grouped into categories based on disease burden and resource utilization is factored into the equation. HCCs are also weighted in a similar way to DRGs and are assigned a coefficient.

The major difference between DRGs and HCCs is acute illness verses chronic illness, respectively. HCCs help to level the risk of caring for sicker patient populations with multiple chronic illnesses over time, whereas DRG methodology assesses resource utilization for acute conditions in which several CC/MCCs may coexist. Risk adjustment also ensures that physicians are not only adequately reimbursed for providing long-term care, but also incentivized to take on more complex patient cases.

The main contention regarding HCCs has been determining exactly what constitutes a patient encounter and ensuring that the HCC is supported by the health record documentation. Legg’s presentation reviewed one of several industry standards, MEAT, which stands for Monitoring, Evaluation, Assess/Address, and Treatment. In order to code a diagnosis according to risk adjustment methodology and place a patient into a HCC, at least one element of MEAT is required.

Legg stressed the fact that a face-to-face encounter with a healthcare professional must have occurred during the one-year lookback period, which begins on January 1 of each year. This means that simply refilling a prescription for a chronic condition in which the physician has not met face-to-face with the patient within that time frame to treat, assess, and monitor that condition cannot be coded. The condition must have been reported within the medical documentation and assessed at least once during the calendar year for it to qualify as a diagnosis in accordance with HCCs.

Several organizations have come under fire recently for non-compliant risk adjustment coding, including UnitedHealthcare, which is the largest provider of Medicare Advantage plans. It was alleged that UnitedHealthcare was defrauding Medicare by coding diagnoses that fell outside the one-year lookback period and using any semblance of a diagnosis within the documentation to place patients in HCCs that brought in added revenue.

Despite the controversial nature of HCCs, Legg sees risk adjustment as the new frontier of coding when standards are enforced and adhered to. Many organizations and commercial payers are beginning to see the benefits of balancing both risk and severity of illness. She pointed out that many physicians are pleasantly surprised to see how HCCs provide not only documentation optimization, but also reimbursement optimization. Physicians see HCCs as win-win, as patients are able to access quality of care when and where they need it, and they are able to provide that care more efficiently when the cost of caring for long-term chronic illness is accounted for ahead of time. This in turn positively impacts both performance and patient health outcomes and helps healthcare providers manage patient populations more effectively.


Morse, Susan. “UnitedHealthcare is evaluating options after losing lawsuit over risk adjustment payments.” Healthcare Finance. August 14, 2018. www.healthcarefinancenews.com/news/unitedhealthcare-evaluating-options-after-losing-lawsuit-over-risk-adjustment-payments.

Vegter, Kimberly. “What is HCC Coding? Understanding Today’s Risk Adjustment Model.” MediRevv. August 18, 2016. www.medirevv.com/blog/what-is-hcc-coding-understanding-todays-risk-adjustment-model.