In a Value-Based Payment World, HCC is the new RVU

Before I was an independent healthcare consultant I was a medical practice executive for large health systems. From very early on, I quickly learned the importance of Relative Value Units (RVUs) in a Fee-For-Service world. An RVU is the numeric weight assigned to any CPT code, and often used as a metric for just about everything: physician productivity, operating costs, revenue projections, and physician compensation packages, to name a few. Readily published benchmarks indicated how well my group of providers were doing compared to their peers, and, best of all, this reliable metric was easily available within a couple of clicks out of any practice management system.

During my time as an independent consultant, however, I have been advising physicians on the importance of documentation with particular emphasis on diagnosis coding, as I helped prepare physicians and health systems with the transition to the ICD-10 code set.

The ICD-10 transition made one thing abundantly clear (to me, anyway). That is, as payment models transition from "volume to value", accurate documentation and diagnosis coding will be paramount as payment models shift away from traditional Fee-For-Service.

Specifically, the literature on upcoming value based reimbursement models almost always mention the use of risk adjustment and Hierarchical Condition Categories, or HCCs.


HCCs have been around for a while, and have been used by Medicare Advantage plans since 2004. CMS reimburses MA plans based on the HCC scores of their patient population. Since cost can vary greatly from one patient to another, risk adjustment models are used as a method to level the playing field for physicians caring for the sickest patients.

HCC methodologies vary, but all take in account the patient's:

The HCC model segments ICD codes into Diagnosis Groups, into what are called "Condition Categories", or CCs. A numerical value, or Risk Adjustment Factor (RAF) is assigned for each HCC, which in a value based payment system, will play a role in determining final reimbursement, since this tells the payer the reason a provider's costs are high is because the patients they care for are more complex, avoiding any penalties, reduced reimbursement, or takebacks.

Think, "RAFs are to diagnosis codes as RVUs are to CPT codes", a weighted measure that produce a value of how complex a patient's needs are, and the more complex, the more resources used.

Other programs where diagnosis-based risk adjustment methodology is applied to determine reimbursement, shared savings, and/or incentive payments are:

Why documenting and reporting diagnosis codes will be so important

Medical record reviews by certified coders hired by the payer (to validate HCC scores reported) often reveal additional diagnoses documented elsewhere other than in the "assessment and plan" section of the note (which are typically the only ones reported on the claim), but could very well be used for risk adjustment calculations.

For instance, in most all risk adjustment models, reporting a diagnosis of an old MI (ICD-10 I25.2) for a patient who has ever had a heart attack will impact overall risk score. This diagnosis carries important implications for all ongoing treatments and is always considered during medical decision making for any future treatments. Documentation of an old MI, or history of heart attack, may be found in a variety of areas of the medical record, however, it is a diagnosis that is rarely submitted on claims, and often only discovered during a professional record review by certified coders on behalf of the health plan.


Although not always considered a HCC, (depends on the payer's specific methodology) dementia remains an important diagnosis for documentation and diagnosis coding. For instance, for practices participating in the Comprehensive Primary Care Plus (CPC+) "Track 2" program, the care management fee equals $100 per member per month for those providers caring for patients with dementia. Dementia with behavioral disturbance as opposed to no behavioral disturbance, or a vascular dementia or dementia associated with other diseases such as Alzheimer's each have a specific ICD-10 code. A higher risk score is assigned to the more severe or more complicated stages of dementia. Documentation and proper code assignment will be critical.


It will be important for providers to understand how risk adjustment works and their purpose in the context of new quality-focused delivery models. Risk dollars and quality scores should not be the primary focus of these discussions, however, but rather how documentation and coding will provide a better picture of the patient's clinical story for the entire care team.

While training and education on CPT guidelines will continue to be important, documentation and diagnosis coding will be an important area of focus for physician and providers to gain additional training as payment models shift away from Fee-For-Service.

Jill Raykovicz-Joines, MHA, CMPE, CPC is an independent consultant and assists physician practices and large health systems. For more information, visit