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Hierarchical condition categories are key for improving health outcomes and getting accurate reimbursements.

Fam Pract Manag. 2021;28(6):6-9

This content conforms to AAFP criteria for CME.

Author disclosure: no relevant financial affiliations.

At the heart of value-based care programs are the dual goals of lowering health care costs and improving outcomes. One powerful way to reach those goals is to identify patients at high risk of serious health events such as emergency department visits or inpatient hospitalizations and prevent them. Regulatory agencies and payers use hierarchical condition categories (HCCs) to calculate patient risk; the higher the risk score for a population, the higher the benchmark will be for expenditures, which can affect shared savings in value-based payment arrangements.1

HCC codes are determined by corresponding diagnosis codes reported on claims. Not all diagnosis codes “ladder up” to HCC codes for risk adjustment, but those that do carry more weight in your patient panel.2 Failing to use accurate diagnosis codes can underreport your patients' severity of illness, which can affect reimbursement in value-based care arrangements.

It's not just a financial concern, though. Accurate diagnosis coding can help your team identify high-risk patients and give them the right care at the right time.


  • Payers use hierarchical condition category (HCC) codes to capture patient risk for value-based care programs.

  • HCC codes are based on ICD-10 codes on claims, which makes accurate diagnosis coding critical to success in value-based care.

  • There are a number of ways to ensure that HCC codes accurately represent your patient panel's risk, including avoiding unspecified and symptom codes when a more accurate diagnosis code is available.


Here are 10 things to remember about risk-adjustment coding.

Duration: HCC codes reset annually, so diagnoses that remain active need to be reported every calendar year (starting Jan. 1) for each patient. They only need to be reported once but must be reported each year, regardless of how long the patient has had the condition. So, if you're doing an annual wellness visit for a patient who has moderate, recurrent major depressive disorder (ICD-10 code F33.1), which has a corresponding HCC code (59), and you discuss the patient's depression (e.g., medications and current management), you can report that diagnosis code for the encounter. In this way, you will not only capture the patient's risk level, which can ensure accurate value-based care payments, but also make sure the patient's condition is being managed proactively.

Specificity: Avoid unspecified diagnosis codes. Most unspecified codes do not risk adjust, so use the most specific code possible for each diagnosis. For example, if you're coding all of your patients with type 2 diabetes using ICD-10 code E11, you're not capturing the true risk for those who have type 2 diabetes with diabetic chronic kidney disease (E11.22) or type 2 diabetes with hyperglycemia (E11.65). Those extra digits make a big difference in HCC codes. Even E11.9 (type 2 diabetes without complications) carries some weight in HCC coding. Being as specific as you can with your diagnosis codes will also help you track which patients have their chronic conditions under control and which need more management.

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