Hierarchical Condition Categories & Risk-Adjustment Scores: An Outline

Wound management professionals and providers often claim that payers do not understand that patients who are living with chronic wounds also have many comorbidities that must be managed in order to close those wounds (and keep them closed). This sentiment was often true before the ICD-10-CM diagnosis coding system was implemented Oct.1, 2015, because wound-related ICD-9 codes were not very specific. Today, the ICD-10 codes provide the opportunity to specifically “paint the picture” of each patient’s primary chronic wound diagnosis and pertinent comorbidities that must be simultaneously managed. However, wound care professionals often only report the primary/secondary diagnosis code(s) required to meet the payers’ coverage requirements. Even though Medicare Advantage Plans have adjusted capitated payments based on the Centers for Medicare & Medicaid Services (CMS) Hierarchical Condition Categories (CMS-HCCs) since 2004, wound management professionals have not paid much attention to them. Now that about 30% of Medicare beneficiaries choose Medicare Advantage Plans instead of the traditional fee-for-service programs, and now that other payment systems (eg, Medicaid, managed commercial plans, accountable care organizations, Part D plans, alternative payment models, Merit-Based Incentive Payment System [MIPS]) are using/are planning to use CMS-HCCs in their payment calculations, wound management professionals should understand the CMS-HCCs. This edition of Business Briefs features an interview with Today’s Wound Clinic editorial advisory board member Donna J. Cartwright, MPA, RHIA, CCS, RAC, FAHIMA, an approved certified trainer on ICD-10 by the American Health Information Management Association and fellow of the American Health Information Management Association. In the following interview, she explains how readers can ensure their CMS-HCC risk-adjustment factor (RAF) scores reflect the complexity of their wound management work. 

Kathleen Schaum (KS): You always teach wound professionals to select the most specific ICD-10 primary code and comorbidity codes that describe the reason for each patient encounter. You also always remind them to review the ICD-10 codes that payers look for when making coverage decisions for specific wound services, procedures, and products. Will you now explain how ICD-10 code selections correlate to the CMS-HCCs?

Donna Cartwright (DC): The CMS-HCCs were developed to report and track the health status (risk scores) of beneficiaries and to identify beneficiaries who require greater costs and who need longer-term care. Those risk scores are used to adjust Medicare payments in the numerous programs you mentioned. Therefore, wound care physicians and other qualified healthcare professionals (QHPs) should take the time to document the beneficiary’s primary diagnosis that justifies the medical necessity for a service/procedure and their comorbidities that must be considered and managed when treating the chronic wound. The CMS-HCCs are similar diagnosis codes that use similar resources that are categorized into disease hierarchies. In 2018, many of the 70,000 ICD-10 codes were sorted into 805 CMS-HCC diagnosis groups. The 805 diagnosis groups were then sorted into 189 CMS-HCC categories. For example, the diabetes mellitus ICD-10 codes were grouped into several CMS-HCCs, depending on whether the patient’s disease had complications/manifestations, was controlled/uncontrolled, type 1 or 2, etc. In some cases, beneficiaries have related diagnoses that track to the same CMS-HCC category. In that instance, only the most serious condition in the CMS-HCC category is counted in the CMS-HCC RAF score. In other cases, the beneficiaries have unrelated diagnoses that track to different CMS-HCC categories. In those instances, all the CMS-HCC categories are additive and are counted toward their CMS-HCC RAF score. Because risk adjustment applies to hospital inpatient and various outpatient settings, wound management professionals should document in the medical record and report on claims the pertinent ICD-10 diagnosis code(s) that justifies the medical necessity of their work and that fits into a CMS-HCC category. Provider-based departments (PBDs) should exercise caution to report these ICD-10 codes in the first four diagnosis code spaces on claim forms. Physicians and other QHPs should report these ICD-10 codes on the claim lines with the services/procedures to which they are affiliated. Consider these ICD-10 diagnosis coding do’s and don’ts:

• Do report all conditions treated and/or managed during each encounter.

• Do not make the mistake of reporting only the first-listed diagnosis for the encounter, if you managed more than one diagnosis. 

• Do not report history of conditions, such as histories of cancer, myocardial infarction, and cerebrovascular accident, when they no longer exist.  

• Do report conditions that are still under treatment (eg, diagnosis for cancer still under treatment).

• Do not report resolved conditions.

• Do report pertinent diagnosis(es) that track to CMS-HCC categories. 

KS: Thank you for providing Table 1 and Table 2 (found in the online version of this article in our December archives). Please describe the relationship between Table 1 and Table 2, and educate the readers on how to use these tables. Can you provide a few scenarios that show how various diabetes ICD-10 codes align with different CMS-HCC categories and thus have different risk scores? Also, please describe how only the most serious condition in each CMS-HCC category is counted toward the risk score and how unrelated conditions in different CMS-HCC categories are also counted and added to the CMS-HCC risk score.

DC: Both tables allow readers to identify the CMS-HCC categories to which specific ICD-10 codes are assigned and then to identify the HCC category’s risk score on the 2018 master list of CMS-HCC categories. For convenience, Table 1 displays some common ICD-10 codes and the CMS-HCC category to which they are assigned. The complete crosswalk of ICD-10 codes and the associated 2018 CMS-HCC categories is available through CMS.¹ Table 2 describes the 2018 CMS-HCC categories and their specific weights for different demographics (eg, home, nursing home, dual-eligible beneficiaries, and institutions. Table 1 contains three columns: The first displays a wound-related subset of 2018 ICD-10 diagnosis codes, the second provides the code description, and the third displays the CMS-HCC category to which each diagnosis code is assigned. Only the most serious condition is counted per CMS-HCC category, but unrelated conditions in different CMS-HCC categories are counted and are additive to each beneficiary’s RAF score. Table 2 contains multiple columns: The first displays the CMS-HCC category number, the second is the description of the CMS-HCC category, and the remaining columns identify risk-adjustment weights based on the patient’s location, whether the patient is disabled or aged (or both), and whether the patient is considered dual-eligible (Medicare/Medicaid). Therefore, the beneficiary’s RAF score is determined by linking the ICD-10 diagnosis code to the appropriate CMS-HCC category in Table 1 and by finding the beneficiary’s location for that CMS-HCC category in Table 2.    

KS: What does RAF mean exactly? And what do the RAF scores mean?

DC: Risk adjustment is the use of beneficiary-level information to explain variations in spending, resource utilization, and health outcomes over a fixed time period — usually one fiscal year. The CMS-HCC model generates RAF scores for each beneficiary. The RAF score reflects the expected cost of care for that beneficiary because it is a combination of demographics (age, gender, location of residence, disability, Medicaid eligibility), health status (diagnoses), disease hierarchies (severity), and disease interactions (complexity). This information is collected from beneficiary claims data and prescription data generated by inpatient hospitals, outpatient settings, and physician offices. The beneficiaries’ RAF scores are prospective in nature (ie, the RAF scores in 2018 are used to predict costs for 2019). The following are the descriptions of the beneficiary RAF scores: 

• RAF score of 1: Patient used an average amount of resources

• RAF < 1: Patient used fewer than average resources

• RAF > 1: Patient used more than average resources

Let’s calculate the RAF scores for these two examples:

• In Example 1, the RAF score (.858) can be calculated by adding the CMS-HCC scores for both CMS-HCC categories 18 and 161. 

• In Example 2, the RAF score (2.395) can be calculated by adding the CMS-HCC scores for CMS-HCC categories 18, 106, and 161. Even though the patient had two different types of ulcers, both ulcer codes track to the same CMS-HCC category. Therefore, only the ulcer code with the highest risk score should be calculated in the RAF score. 

KS: Is it true that each physician/QHP has an accumulative RAF score that represents the complexity of all the beneficiaries attributed to him/her by CMS? If so, where can that score be found? 

DC: Yes, each physician’s/QHP’s RAF score reflects the complexity of his/her beneficiary population and the expected cost of care for that population. The RAF score ensures that physicians/QHPs are not unfairly penalized for managing patients with complexities that impact outcomes and costs beyond the professional’s control. As with former value-based payment modifiers, the CMS-HCC system seeks to secure reimbursement adjustments for physicians serving at-risk patient populations. Medicare anticipates that complicated patients will require more resources and more costs. Once the beneficiary RAF scores are calculated, the CMS-HCC model generates a CMS-HCC RAF score for each physician/QHP. Physicians with RAF scores > 1 are perceived to be managing more complex patients. Physicians/QHPs can find their RAF scores online.²  

KS: When did Medicare start to consider each physician’s/QHP’s accumulative CMS-HCC RAF score in the calculation of their costs for MIPS?

DC:For the 2017 MIPS transition year, the “cost performance” category did not count toward physicians’/QHPs’ final MIPS scores. In the 2018 MIPS performance period (the second year of the program), the weight of the “cost performance” category is 10% of the total MIPS score. The Chart at right shows the weight assigned to the “cost performance” category for each year of the MIPS program. Because this category is risk-adjusted, providing care to riskier patient populations will increase physicians’/QHPs’ cost benchmarks — but only if the diagnosis codes on the Medicare claims reflect their beneficiaries’ medical complexity. Therefore, accurate diagnosis coding (considering the HCC) and documentation is critical. 

KS: I assume that hospital-owned outpatient wound management PBDs that contract with Medicare Advantage Plans should also be concerned about their beneficiaries’ RAF scores. Is that true? If so, should the PBD exercise caution when reporting ICD-10 codes on their claim forms?

DC: Yes, PBDs should meticulously document and report complete and accurate diagnoses when managing their beneficiaries because those elements are critical to determining their beneficiaries’ RAF scores on an annual basis. The scores of their beneficiaries impact the hospital’s contracted payment rates with various payers, particularly the growing Medicare Advantage plans. More than 30% of Medicare beneficiaries have enrolled in Medicare Advantage plans.  

KS: You and I always advise PBDs to submit “per encounter” claims. Is capturing accurate diagnosis codes that appropriately align with CMS-HCCs another good reason not to submit monthly/series claims for wound management services provided by PBDs?

DC: Absolutely! PBDs must exercise caution that the ICD-10 code(s) that represent the patient’s diagnosis(es) for each unique encounter are reported in the first four
diagnosis code spaces on the claim form. This cannot be guaranteed to occur when PBDs submit monthly/series claims. \

KS: You mentioned that documentation is important to the HCC risk-adjustment
process. Why? 

DC: Physicians and QHPs should document all present, relevant diagnoses (eg, primary diagnosis that describes the main reason for the encounter and additional comorbidities that impact care and outcomes), their assessment and plan of care to manage the condition, how comorbid conditions are treated, and the effects of the treatments. Physicians/QHPs should be taught how diagnosis codes track to CMS-HCC categories and how that affects their beneficiaries’ RAF score and the professional’s CMS-HCC risk-adjustment score. Some important documentation considerations include:

• Document all cause-and-effect relationships.

• Link manifestations and complications to the disease process.

• Verify that electronic records allow for manual sequencing to ensure that the diagnosis codes that track to CMS-HCC categories will be included in the first four diagnosis spaces on the PBD’s claim.

• Include status codes that have values associated with them, such as status amputations, stomas, hemiplegia/paraplegia — anything that would affect the treatment decisions for the patient.

• Include all current diagnoses as part of the current medical decision-making process and document them in the note for each visit.

• Chronic diseases should continue to be documented if the patient receives care and/or treatment for the condition.

KS: Do you have any final thoughts you would like to share with our readers?

DC: I want to encourage all physicians/QHPs to take time to document the diagnoses that reflect the complexity of their patients and to appropriately report the ICD-10 codes (considering the CMS-HCC categories) on their claims. However, insignificant conditions or signs/symptoms that do not require treatment should be documented, but not coded. In addition to influencing the physicians’/QHPs’ contracted payment rates (with Medicare Advantage and other payers) and the cost component of their MIPS score, their CMS-HCC RAF score also allows physicians/QHPs to compare themselves to other providers who perform similar work.  

Therefore, risk adjustment now accounts for the fact that some beneficiaries are sicker than others and that some conditions are out of the physicians’/QHPs’ control: Both situations can affect the total cost of care and quality of outcomes. In risk-adjusted payment models, including MIPS, payment is based on the beneficiaries’ expected healthcare costs, which consider the active diagnosis and comorbid conditions that impact the severity of illness and beneficiary risk. Physicians, QHPs, and PBDs can receive additional payment for managing beneficiaries with multiple comorbidities if they document (and report on their claims) correct, specific diagnoses (primary and comorbidities) and patient demographics. Now is the time to make a 2019 New Year’s resolution to document and code accurately, thoroughly, and to a high level of specificity, because the beneficiaries’ 2019 RAF scores and the professionals’ 2019 CMS-HCC RAF scores will impact payment in 2020. n

Kathleen D. Schaum oversees her own consulting business and is a founding member of the TWC editorial advisory board. She can be reached for consultation and questions at kathleendschaum@bellsouth.net

1. Details for title: 2019 model software/ICD-10 mappings. CMS. 2018. Accessed online: www.cms.gov/medicare/health-plans/medicareadvtgspecratestats/risk-adjustors-items/riskmodel2019.html

2. Physician compare datasets. CMS. 2018. Accessed online: https://data.medicare.gov/data/physician-compare