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Hierarchical Condition Categories Driving Demand for Accurate Coding

by Rose T. Dunn, MBA, RHIA, CPA, FACHE

Even though the Hierarchical Condition Categories (HCCs) have been around since 2004, the interest in this categorization methodology by coding professionals is relatively recent. Used by Medicare Advantage, Medicaid, and risk sharing programs, HCCs serve as the basis of defining the complexity of the mix of patients being treated by physicians. However, the source of the data that determines an HCC may come from a hospital’s claim or the physician’s office claim.

HCCs are based on ICD-10-CM codes. ICD-10-PCS and CPT codes do not generate an HCC although the costs associated with ICD-10-PCS and CPT codes are part of the algorithm that determines the weight or relative factor for each HCC and ultimately the reimbursement. Approximately 10,000 of the ICD-10-CM codes qualify for placement in a payment HCC. Many of the unspecified codes are excluded. Conditions that qualify as CCs and MCCs are often HCCs, so the emphasis being given to documentation clarity in an inpatient setting is equally important for HCCs as it is for DRGs.

The structure of HCCs is similar to DRGs in that the grouping of similar conditions that utilize similar resources occurs. The DRG weight is similar to HCC relative factor. And, the need for specificity in coding is necessary to avoid being left out of the hierarchy altogether. HCCs are also similar to APCs in that a patient may have more than one HCC. The patient’s Risk Adjustment Factor (RAF) is based on the total number of different HCCs accumulated throughout a year. In the Medicare Advantage environment, the RAF serves as the conversion factor for the next year’s reimbursement for that patient.

Introduction to HCC Coding
Complete and accurate coding for Hierarchical Condition Categories (HCCs) presents an opportunity for improved data quality and appropriate reimbursement. Learn how from nationally recognized HCC expert, Rose T. Dunn, MBA, RHIA, CPA, FACHE.



Rose Dunn is the Chief Operating Officer of First Class Solutions, Inc., a healthcare information management leader since 1988, offering professional consulting services in health information management operations and information governance issues, as well as coding support, coding quality reviews, privacy/security guidance, temporary (interim) management, revenue cycle oversight, and accreditation preparation. Rose jumped into the weeds of ICD-10 more than 10 years before it was implemented and has been getting back into the weeds of HCCs for the last 2 years. Rose is the author of “The Revenue Integrity Manager’s Guidebook” available from the National Association of Healthcare Revenue Integrity and other books on Coding Management and Auditing from HCPro. She is assisting Libman Education in the development of an HCC educational program. Ms. Dunn holds a B.S. and M.B.A. from Saint Louis University. Contact Rose at 314-209-7800 or [email protected]

About the Author

Libman Education
Libman Education Inc. is a leading provider of training for the health care workforce offering self-paced and instructor-led online courses designed and developed by leading industry experts in Health Information Management (HIM) and Medical Record Coding. Our courses are specifically designed to improve individual skills and increase the efficiencies and competencies of health care providers and institutions. At Libman Education, we understand the needs and challenges of a well-trained workforce and offer the right-mix of online education to ensure that the health care professionals are prepared to meet the challenges of the changing workplace.

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