HCC Coding: Hierarchical Condition Categories
Hierarchical Condition Categories (HCCs) are CMS's risk adjustment model for Medicare Advantage, mapping ICD-10 diagnosis codes to 86 condition categories that determine each patient's Risk Adjustment Factor (RAF) score and per-member capitation payment.
What is HCC Coding?
The CMS Hierarchical Condition Category (CMS-HCC) model is a risk adjustment model used primarily for Medicare Advantage (MA) plan payment. The model maps ICD-10-CM diagnosis codes to approximately 86 condition categories, which are then hierarchically organised so that more severe manifestations of a condition "trump" less severe ones. Each HCC category is assigned a relative factor value; the sum of all applicable HCC factors plus demographic factors (age, sex, Medicaid dual status) constitutes the patient's RAF score.
The Hierarchical Structure
The "hierarchical" aspect of HCC coding means that within a disease category, only the highest-severity HCC is counted if multiple related codes are present. For example, in diabetes:
- HCC 17: Diabetes with acute complications — highest severity, highest RAF contribution
- HCC 18: Diabetes with chronic complications
- HCC 19: Diabetes without complication — lowest severity
If a patient has both HCC 17 and HCC 18 documented, only HCC 17 is counted — hence the "hierarchical" structure. This means documenting the most specific, highest-severity diagnosis is financially critical.
Annual HCC Capture Requirement
HCC coding for Medicare Advantage requires annual recertification — each chronic condition must be documented and coded in a qualifying encounter within the current calendar year. A patient with diabetes and CHF whose A1C and heart failure management are addressed during a January AWV must have both conditions coded in that encounter (or a subsequent encounter that year) to maintain their HCC-based RAF score for the payment year. Conditions documented in a prior year but not in the current year are "dropped" from the RAF calculation, reducing capitation revenue.
Suspect HCC Gap Identification
A "suspect HCC" is a condition that clinical data suggests a patient likely has (e.g., laboratory values consistent with CKD, imaging findings consistent with diabetic retinopathy) but that has not yet been coded with an HCC-qualifying ICD-10 code in the current year. Analytics that identify suspect HCCs — using lab values, medication lists, referral patterns, and historical coding — enable targeted clinician outreach to assess, document, and code these conditions, capturing appropriate risk-adjusted revenue while ensuring patients receive needed care management.