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September 2013 - Volume 10 - Issue 3


2014 Holds Big Changes for the CMS-HCC Model

The purpose of the CMS-HCC model is to improve the accuracy in predicting the costliness of Medicare Advantage (MA) enrollees’ healthcare costs and to properly fund MA plans for those expenses. It isn’t a perfect model but it surpasses the demographically-based payments of the “old days” that neglected an important characteristic in costliness - the presence of medical conditions – and mitigates selection issues.
In the CMS-HCC model, diagnoses are assigned to hierarchical condition categories (HCCs); the Centers for Medicare and Medicaid Services (CMS) currently uses only 70 of 189 HCCs to pay MA plans. For each HCC, CMS assigns a coefficient which indicates the marginal cost of treating the conditions in that HCC. The coefficients, in addition to some demographic variables, comprise the enrollee’s risk score. In a nutshell, the “sicker” the enrollee (based on the number of HCCs represented in the individual’s diagnostic profile), the higher the funding to the MA plan in order to fund the cost of the care. However, the Medicare Payment Advisory Commission (MedPac) acknowledges that the model underpredicts costs for enrollees with five or more conditions and, to a larger degree, for those with eight or more conditions. (MedPac, June 2012)
In addition, CMS and the Government Accountability Office have concluded that risk scores in MA plans have risen faster than those for fee-for-service (FFS) beneficiaries and so significant adjustments have been made to the 2014 CMS-HCC model to “bring MA risk scores in line with those in FFS Medicare.” Consequently, the Patient Protection and Affordable Care Act (PPACA) requires CMS to reduce MA enrollees’ risk scores by an amount greater than 3.4% each year. (MedPac, June 2012)
The biggest operational change affecting our clients is the removal of certain frequently – occurring diagnoses from the model because their HCCs have supposedly lost their predictive value. One might question whether - instead or in addition to - they were removed because of their widespread presence in enrollee diagnostic profiles. Chronic kidney disease (CKD) is one glaring example. CKD is classified in five stages based on kidney function, and stages 1 through 3 have been removed from the model for 2014, which means that there is no longer a coefficient associated with these conditions. According to the National Kidney Foundation, of the 26 million American adults with CKD, almost 19 million have stages 1 through 3. Similarly, the National Institute of Health reports that 60-70% of diabetic patients have some form of neuropathy; unfortunately, that condition has also been removed from the CMS-HCC model for 2014.
Needless to say, these changes have created quite an outcry among our clients, who have redoubled efforts to ensure the most complete and accurate coding and documentation for the balance of 2013. Moreover, CMS is studying plan and provider use of health risk appraisals (HRAs) and annual wellness visits (AWVs). The Centers for Disease Control defines an HRA as “a comprehensive systematic approach to collecting information from individuals that identifies risk factors, provides individualized feedback, and links the person with at least one intervention to promote health, sustain function and/or prevent disease. A typical HRA instrument obtains information on demographic characteristics (e.g., sex, age), lifestyle (e.g., smoking, exercise, alcohol consumption, diet), personal medical history, and family medical history.” An HRA form is a comprehensive document that compiles an individual’s history and summarizes the status of all chronic conditions. CMS is questioning their validity because of a concern about the absence of HRA-identified conditions in subsequent provider encounters.
To learn more about the CMS-HCC changes for 2014 and their funding impact, feel free to attend one of our webinars scheduled throughout the Fall months. For more information, visit
M. Alexandra Johnson, Coleman Consulting Group, Inc., can be reached at (954) 578-3331 or or visit
Source: Issues for risk adjustment in Medicare Advantage, June 2012, Medicare Payment Advisory Commission, accessed on March 7, 2013
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