HCC Overview
Hierarchical Condition Categories (HCC) is a system used to predict healthcare costs based on patient diagnoses, mainly in Medicare Advantage (MA) programs. The risk score is calculated by summing the weights of a patient’s conditions, with higher scores reflecting more severe health conditions.
Dementia in Risk Adjustment
Historically, under Version 24 (V24), dementia was classified into two categories:
- HCC 51: Dementia with Complications
- HCC 52: Dementia without Complications
With the introduction of Version 28 (V28), dementia is now divided into three categories:
- HCC 125: Severe Dementia
- HCC 126: Moderate Dementia
- HCC 127: Mild or Unspecified Dementia
This change allows for more accurate risk scoring by better reflecting the severity of dementia and its healthcare needs.
Impact of V24 to V28 Transition
- Granularity: V28 provides a more detailed classification, improving risk score accuracy and better capturing the range of care required for dementia patients.
- Healthcare Resource Use: By differentiating severity, V28 helps align reimbursement with the actual level of care needed for each patient.
- Phase-in: The transition from V24 to V28 is phased in from 2023-2026, with both models in use during the shift.
- 2025: 33% V24 + 67% V28
- 2026: 100% V28
Medicare Advantage Reimbursement
MA plans receive monthly payments based on a patient’s Risk Adjustment Factor (RAF) score, calculated from submitted diagnoses, rather than claims-based reimbursements. Payments are determined by the patient’s health status as reflected in their RAF score, which considers multiple encounters and conditions over time.
Example
- Patient with Severe Dementia (HCC 125) and Hypertension (HCC 108)
- Risk Score: 0.9 (Dementia) + 0.3 (Hypertension) = 1.2
- Base Payment: $800
- Reimbursement: 1.2 x $800 = $960
This system ensures that health plans receive consistent, predictable payments based on the overall health of their members, without needing to wait for specific claims to be submitted.
If you have any questions or need further guidance, feel free to reach out.
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