Understanding Risk Adjustment and HCCs
Risk Adjustment is a process for quantifying an individual's health (or sickness) into a Risk Adjusment Factor or risk score. Risk scores are calculated using demographic factors (gender, age, disability status, etc.) as well as medical status and history (specifically chronic illnesses such as cancer, diabetes, heart failure, etc). A numeric value is assigned to these various factors using a risk model. Various risk models exist (e.g., Rx and ESRD) to address the needs of various payment systems. A risk score can be used in many applications, such as calculating capitated payment, or normalizing hospital performance scores by accounting for the general sickness of the population they treated.
Hierarchical Condition Categories (HCCs) are an implementation of Risk Adjustment and are used to capture medical status and history in many risk models (including the current risk models used by CMS and ACA requirements). In HCC methodology, certain diagnoses (i.e., ICD-10-CM codes) are assigned an HCC according to the nature and severity of the diagnosis. These HCCs in turn are also assigned a risk factor. A patient's risk score is generated by adding together the demographic risk factors with the risk factors for the various HCCs they qualify for (with hierarchies preventing multiple diagnoses in the same disease group from inappropriately increasing the risk score).
