Author: Amy Crenshaw-Pritchett
Manager, HCC Coding/Audit & Education Services

(303) 801-0111


As CMS Focuses on Quality, there are Monumental Changes to Reimbursement for Quality on the Horizon!

The Centers for Medicare and Medicaid Services (“CMS”) utilize risk adjustment factors to estimate the cost of Medicare Advantage (“MA”) beneficiaries and those associated costs of providing care.  Risk adjustment factor scores govern the amount paid by the health plan during the year for the beneficiary’s care.  The risk adjustment scores factor in demographic and specific life and health information such as the beneficiary’s:

  • Age
  • Biological Sex
  • Geographical location
  • Dual coverage eligibility
  • Acquired health status
  • The presence and active nature of multiple chronic conditions whose level of severity are much greater, and the estimated cost to treat the beneficiary are estimated at higher benchmarks.
  • Active medications

CMS released the “Advanced Notice of Methodological Changes for CY 2024” on May 1, 2023.  The change will affect MA capitation rates along with Part C and Part D payment policies.  The Advanced Notice describes the drastic changes to the MA risk adjustment model, from Version 24 to Version 28.

CMS noted the change from Version 24 to Version 28 was initiated to better align with Medicare Fee-For-Service (MFFS) to clinically identify those conditions which may have a coding variation.  In the latter portion of CY 2022, CMS released numerous audit findings noting the Risk Adjustment Model included ICD-10-CM diagnosis categories that could include variations leading to inappropriate assignment by providers.  CMS also cited that the diagnosis codes did not provide a clear picture of future cost predictors.  This, along with the Hierarchical Condition Categories (“HCC”) payment models becoming insignificant, including diagnoses that were rarely seen, did not meet coding specificity criteria.

The Centers for Medicare & Medicaid Services (CMS) HCC model was initiated in 2004 and is becoming increasingly prevalent as the environment shifts to value-based payment models.

The Hierarchical Condition Category (HCC) coding relies on ICD-10-CM coding assignment to translate to risk scores for patients. An HCC is mapped to a specific ICD-10-CM code.  The current HCC model has been used with minor updates year after year but remained standard since 2015.  However, with the initiation of Version 28, there will be a significant change to that model.  This will affect the way we do business across MA plans.

Once the new Version 28 (“V28”) is released, provider documentation will be even more critical to assign the best and most proper code to capture the most accurate HCC assignment.  This is because the volume of ICD-10-CM codes are going to be reduced and may affect the scores of a large percentage of beneficiaries who may have scores higher than they would after the V28 change.

One of the largest changes to the RA model for CY2024 is the expansion of HCC categories from 86 to 115.  However, with the deletion of 2,194 diagnosis codes that risk currently adjust, the same conditions will no longer lead to additional payment.  For example, in V28 Diabetes will limit the coefficient categories that also currently carry the same HCC weight, because CMS adjusted all the relative factor weights for diabetes codes and reclassified them into four (4) levels instead of three (3).  Additionally, the risk adjustment model is going to drop solid organ transplants and instead, will classify under the specific body system.

In another example, diabetes with peripheral vascular disease carried a risk adjustment weight of 0.302 in V24 with the addition of the disease coefficient of 0.288 for peripheral vascular disease.  However, in the V28 model, diabetes has been recalculated to a lower risk adjustment score of 0.166 and no longer contains the disease coefficient interaction for peripheral vascular disease, This change, which is a common condition in member populations that currently risk adjust results in V28 lowering the risk adjustment score by (0.424) for its reimbursement calculation.

It will be imperative to capture disease interactions such as type II diabetes with congestive heart failure to receive what the coefficient amounts where in V24, underlying complications of diabetes also calculated to a coefficient.

For more examples of how this change will affect reimbursement, or if you have any questions about your HCC Coding, please contact Amy Pritchett at APritchett@AskPHC.com.