The Centers for Medicare & Medicaid Services (CMS) is updating its patient risk scoring system in 2024 in a way that will change payments that are based on hierarchical condition category (HCC).

The current HCC model was developed when the health care system used ICD-9 diagnosis codes. On Jan. 1, CMS will begin transitioning payment to a new system based on ICD-10-CM codes, as well as revise which diagnoses result in HCCs that carry increased payments.¹ CMS says its new model “reflects more current costs associated with various diseases, conditions, and demographic characteristics.”² But the changes will likely downgrade some patients' risk adjustment factors (RAFs), which could lower payments for practices that participate in capitated payment plans through either Medicare Advantage or private payers who use the CMS risk adjustment methodology. The change from the current system (Version 24, or “V24”) to the new system (“V28”) drew objections from a coalition of medical groups during the public comment period,³ but CMS is moving forward, albeit with a three-year phase-in (CMS is already using the new model but will base only 33% of payment on it in 2024).

Overall, CMS is predicting that RAF scores will drop by about 3% when the phase-in period is complete,⁴ but for some practices it could be more. It all depends on your patient panel and the prevalence of certain high-risk conditions within it. For practices that participate in capitated payment programs based on HCCs, the new model will increase the importance of accurate, precise, specific diagnosis coding to fully capture patient risk. That should not only result in payments that more accurately reflect risk, but it can also help practices identify which patients need more care or outreach to avoid hospitalizations or poor health outcomes.