HCC coding stands for hierarchical condition category coding. The Centers for Medicare and Medicaid Services (CMS) implemented HCC coding in 2004 to help estimate Medicare enrollees’ healthcare costs for the coming year.
An HCC is a kind of chronic medical condition with similar cost patterns. Individual HCCs include diabetes, chronic obstructive pulmonary disease (COPD), asthma and pulmonary disease, congestive heart failure, breast and prostate cancer, rheumatoid arthritis, and significant depression.
Most disease states have varying degrees of severity, so the model is hierarchical. There are different codes for diabetes with complications and diabetes without complications. While patients may have multiple HCCs due to other disease manifestations, the model ensures that they are assigned HCC that represents the most severe disease state. HCCs must be recorded and re-submitted every year.
How are HCC Codes assigned?
Healthcare providers provide HCCs to health plans and Medicare based on International Classification of Diseases (ICD-10-CM) codes. Not all ICD-10 codes correspond to an HCC. For example, a non-chronic condition with no long-term impact on health, such as abdominal pain or a sprained wrist, will not locate an HCC.
The HCC model is constantly updated to improve clinical documentation.
Process of Risk Management
The risk management process serves as a framework for the necessary tasks. There are five steps to managing risk. These processes are referred to as the risk management process and are as follows.
Step1: Identifying risks
The first stage in risk management is identifying the risks/hazards the company faces in its operating environment. It is essential to identify possible risk variables. These risks are recorded in a manual setting. If the organization uses a risk management solution, all this information is entered into the system.
There are numerous types of risks:
- Legal risks
- Environmental risks
- Market risks
- Regulatory risks, for example.
Step2: Analyze risk
Investigation of risk is essential. The risk’s scope must be established. It is also critical to comprehend the relationship between the risk and other organizational factors. Consider the total number of business operations affected to establish the severity and significance of the risk. There are risks that can bring the entire firm to a halt, while others will merely cause minor hassles in the analysis.
Step3: Risk Evaluation
The risks must be ranked and prioritized. Most risk management solutions categorize risks depending on the magnitude of the risk. Risks that may cause minor discomfort are rated low, whereas risks that may result in catastrophic loss are ranked highest. It is critical to rate risks because it allows the organization to acquire a comprehensive view of its risk exposure.
Risk assessments are classified into two types:
- Qualitative risk assessments: Risk assessments are essentially qualitative; while measurements can be derived from risks, most threats are not measurable.
- Quantitative risk assessments: Quantitative risk assessments are the best way to estimate financial risks.
Step4: Implements a solution
Every risk must be reduced or eliminated to the possible extent. That is accomplished by contacting specialists in the field to which the risk pertains. That means getting every stakeholder and then scheduling meetings so that everyone can talk about and discuss the concerns in a manual environment.
Step5: Monitor risk
Some risks cannot be eradicated; they are constantly present. Market risks and environmental risks are two types of risks that must be continuously evaluated. Dedicated staff did monitoring in manual methods. These experts ensure that all risk factors are closely monitored.
The risk management system monitors the organization’s whole framework in a digital situation. Any change in a factor or risk is immediately apparent to everyone.
Each phase in a manual system entails general documentation and administration.
How Is Risk-Adjusted?
For each enrollee in plan, the model estimates risk scores for a specific set of conditions. Risk scores are based on demographics and diagnosis code issued during medical visits. The risk ratings assigned to each enrollee estimate the enrollee’s expected expenses compared to the predicted costs for the “typical” enrollee.
Risk Adjustment Model
The Risk Adjustment (RA) model calculates a risk score based on a patient’s demographics and diagnoses, which is a relative measure of how expensive that patient is expected to be.
Healthy patients have a lower-than-average Risk Adjustment Factor (RAF) compared to unhealthy patients. Revenue from insurance premiums is transferred from healthy patients to patients with higher-than-average RAF scores (unhealthy patients). It would be unfair to compare the costs incurred by a healthy member to those incurred by a sick member without adequately adjusting for each person’s expected cost based on their health condition.
Importance of risk adjustment model
- Proper risk-adjustment models benefit patients, payers, physicians, and policymakers alike.
- A precise risk-adjustment system is critical to insurance exchanges’ stability and long-term viability.
- Inadequate funding for plans that enroll sicker populations with higher-than-average health care requirements can result from inaccurate risk adjustment.
- Insufficient funding may make treatment to some enrollees unaffordable for plans, causing insurance firms to withdraw entirely from the market.
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