As providers expand the use of telehealth, HHS will continue to include select telehealth and telephone-only services in its risk-adjustment programs.

Hierarchical Condition Category (HCC) coding is a risk-adjustment model originally designed to estimate future healthcare costs for patients. The Centers for Medicare & Medicaid Services (CMS) HCC model was initiated in 2004 and is becoming increasingly prevalent as the environment shifts toward value-based payment models.

HCC coding relies on ICD-10-CM coding to assign risk scores to patients. Each HCC is mapped to an ICD-10-CM code. Along with demographic factors such as age and gender, insurance companies use HCC coding to assign patients a risk adjustment factor (RAF) score. Using algorithms, insurance companies can use a patient’s RAF score to predict costs. For example, a patient with few serious health conditions could be expected to have average medical costs for a given time. However, a patient with multiple chronic conditions would be expected to have higher healthcare utilization and costs.

These cost estimates are then translated to payments for Medicare Advantage (MA) programs/providers. Per AHA (the American Hospital Association), the risk-adjustment program transfers funds from plans with low-risk enrollees to plans with high-risk enrollees to “help stabilize premiums for non-grandfathered plans in the individual and small group markets.”

Why is HCC coding important? It helps communicate patient complexity and paints a picture of the whole patient. In addition to helping predict healthcare resource utilization, RAF scores are used to risk-adjust quality and cost metrics. By accounting for differences in patient complexity, quality and cost performance can be more appropriately measured.

Examples of Risk Adjustment Scoring

Example 1: a 69-year-old female patient with type 2 diabetes with no complications, hypertension, and a body mass index (BMI) of 38.4* 

ICD-10DESCRIPTIONRAF
 Demographics (age and gender)0.323
E11.9                     Type 2 diabetes mellitus without complications0.105
I10Essential (primary) hypertension0.000
Z68.38Body mass index (BMI) 38.0-38.9, adult0.000
  Total Risk: 0.428

Now let’s take the same patient, but add the clinical details left out above.

Example 2: a 69-year-old female patient with type 2 diabetes with diabetic polyneuropathy, hypertension, morbid obesity with a BMI of 38.4, and congestive heart failure, unspecified*

ICD-10DESCRIPTIONRAF
 Demographics (age and gender)0.323
E11.42Type 2 diabetes mellitus with diabetic polyneuropathy0.302
I10Essential (primary) hypertension 
E66.01 & Z68.38Morbid (severe) obesity due to excess calories and body mass index (BMI) 38.0-38.90.250
I50.9Heart failure, unspecified (includes congestive heart failure not otherwise specified)0.331
 Disease interaction (DM + CHF)0.121
  Total Optimized Risk: 1.327

*These are sample patients only, using 2020 CMS HCC model values and 2022 ICD-10-CM codes. 

This patient now becomes a higher risk based on the RAF complete clinical profile score.

HCC and Risk Adjustment during the Pandemic

When practices pivoted to virtual care at the height of the COVID-19 pandemic, there was not clear direction on the validity of telehealth services for HCC capture. After many inquiries to CMS, there was finally published guidance on April 21, 2020, stating that telehealth, including audio and video encounters, were acceptable for inclusion of HCC codes, because they were being used as in-person visits, and being encouraged to slow the spread of COVID-19.

However, the audio-only services were not allowed at that time, which caused some frustration for providers that had patients with either low or no Internet access for an audio-video visit, or preferred the telephone option for their care instead.

In a recent CMS transmittal, dated April 29, 2022, CMS added the following to the FAQ sheet:

“In response to the COVID-19 pandemic and the continued need to use telehealth and virtual care options, HHS (the U.S. Department of Health and Human Services) is extending policies related to the treatment of telehealth and telephone-only services that were put in place for the 2020 and 2021 benefit years to the 2022 benefit year for the purposes of the HHS-operated risk adjustment program under section 1343 of the Affordable Care Act.”

Now, there are some caveats of which to be aware, per CMS:

  1. The e-visit CPT set (98970-98972, 99421-99423) and (98966- 98968, 99441-99443) is for use by physicians and non-physician qualified health professionals who may independently bill for E&M (evaluation and management) visits. If they are not allowed to bill for E&M services, their telehealth services would not count toward HCC capture.
  2. Like telehealth visits, telephone-only services are subject to the same requirements regarding provider type and diagnostic value, and must be reimbursable under applicable state law. If states have taken audio-only encounters off of their payable services, or have let their PHE (public health emergency) waivers end, they may not be considered for HCC reporting.
  3. We recognize that many conditions cannot be diagnosed telephonically, but will defer to applicable coding and diagnosis guidelines setting groups (e.g., the American Medical Association) on what a permissible diagnosis telephonically may be. Risk-adjustment eligible diagnosis codes provided via allowable telehealth and telephone-only services will be validated in HHS-operated risk adjustment data validation in the same manner as risk adjustment diagnosis codes provided via in-person services are validated. 
  4. HHS evaluates CPT/HCPCS codes for inclusion in risk adjustment on a quarterly basis, which allows for new codes to be evaluated and included regularly. We also intend to reconsider these codes’ inclusion for future benefit years, as appropriate.

This is good news, as far as capture for HCC and risk-adjustment reporting goes. But it is also important to remember that the HHS Office of Inspector General (OIG) is scrutinizing MA plans more than ever due to non-compliant coding. So, with telehealth services now allowed to be considered under the risk-adjustment model, it is imperative that providers are as accurate as possible when reporting HCC codes to avoid audit exposure and False Claim Act allegations.

Reminders for HCC Coding

  • Risk adjustment scores reset every year. Practices need to report active diagnoses annually, even chronic conditions. The annual wellness visit is a good opportunity to capture all appropriate diagnoses. Preventive screenings, such as screening of risk factors for depression, aid in identifying additional diagnoses that contribute to a patient’s risk.
  • HCCs are additive, so it is important to code all conditions that coexist at the time of the encounter or affect patient care or treatment.
  • Conditions that were previously treated and no longer exist should not be coded. History codes may be used as secondary codes if the condition or family history impacts current care or influences treatment.
  • Documentation must support the diagnoses reported. A good rule of thumb is to document to the MEAT principles: a diagnosis should be monitored, evaluated, assessed, or treated. Diagnoses that are not supported by documentation will not be upheld in the event of an audit. Coding should always comply with the ICD-10-CM Coding Guidelines.
  • The medical record must contain a legible signature, with credentials.
  • Code to the highest level of specificity and ensure that the diagnoses are properly sequenced on the claim. Some things to consider when selecting the appropriate diagnosis code:
    • Type and underlying cause (e.g., diabetes type 1 or 2, due to underlying condition, postprocedural circumstances, or due to genetic defects, etc.)
    • Control status
    • Severity
    • Site, location, or laterality
    • Associated co-morbid conditions
    • Substance use/exposure

With the ongoing pandemic still requiring providers to expand the use of telehealth and virtual care options, HHS will continue to include select telehealth and telephone-only services in its risk-adjustment program for qualified health plans in 2022.

Programming Note: To learn more about this topic, listen to Terry Fletcher live today on Talk Ten Tuesday, when she will elaborate on the CMS position on telehealth and HCC reporting.

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