In value based programs such as the Medicare Shared Savings Program (MSSP), expenditures for patients are benchmarked and risk adjusted based on the medical complexity of the patient. Since 2004, CMS gauged a patient’s medical complexity with HCCs. HCCs evolved through the 21st Century Cures Act and are now the workhorse measurement of medical complexity for population health and value-based performance.
HCCs succinctly capture patient medical complexity as providers submit qualifying diagnoses on professional, inpatient, and outpatient claims. These diagnosis codes are categorized into groups that describe the medical condition, and then some are further organized into hierarchical condition categories that indicate levels of severity. Some examples of the condition categories include vascular disease, diabetes, and chronic heart failure, with higher risk scores assigned to conditions with chronic or acute complication. Each HCC is also assigned a risk-adjustment factor (RAF) weight based on its relationship to driving increased medical expenditure. In general, the HCC methodology will assign higher risk scores for patients with higher medical complexity.
In the context of Medicare Advantage, CMS uses these scores, in aggregate, to determine Medicare Advantage capitation rates. In MSSP, HCCs influence benchmark expenditure. HCC analytics through the ACO lens can guide ACOs through their population health management initiatives, ensuring their patients are getting the appropriate level of care. Within the general Medicare Fee-for-Service environment, HCC analytics can also support various initiatives that require an understanding of a new population’s health, such as expansion into a new market.