Risk Coding and Stratification: A Chicken or the Egg Story

As a business consultant for value-based care-focused provider organizations, one of the major concerns is always risk coding. Risk coding is the use of proper diagnoses and/or other metrics to represent patients’ acuity of illness. This method helps to offset the cost of providing healthcare services to those who may require more care than others1. Both the public and private sectors use this scoring method to help estimate benchmarks and capitation payments. In fact, assessment of risk is commonplace in all forms of insurance (auto, home, etc.), this is simply how the healthcare industry assesses it.

The Center for Medicare and Medicaid (CMS) use the Hierarchical Condition Category (HCC) method, which is prospective in nature, meaning it takes into consideration the diagnoses from one year to predict the payment for the next year2. A second method is the Johns Hopkins Adjusted Clinical Group® (ACG®) system, and there is also the DxCG methodology which is another population/patient case-mix adjustment system used by Medicare and commercial payers. The HCC method uses demographic information combined with diagnoses to compile a score with a significant emphasis on chronic conditions. Chronic conditions are costly for the healthcare system, and comorbidities only exacerbate current chronic conditions. Someone with Chronic Obstructive Pulmonary Disease (COPD) is prone to more complications when they have COPD with hypertension and obesity. The disease interaction exponentially affects the cost of care predictions.

So how do provider organizations use HCC information? The risk scores first help with financial predictions for performance. If the value-based models use benchmarks, then risk-adjusted expenditures will help to predict both performance and cost later down the line. Another way to utilize risk scores is to stratify the population to properly, and effectively, manage conditions. Risk stratification is a great way to identify those patients in need of case management versus care management versus schedule regular appointments. Each level requires a different amount of focused care.

So how is risk coding a chicken or the egg story? Well, that’s because caregivers want to deliver the best care to their patients, which means they will use risk coding data to determine the right level of care. However, if patients are not accurately or appropriately coded, then the work and effort will fall short since HCC is the only way that CMS can give you credit for all the hard work they’re doing. So should organizations focus on coding education first, and then deploy risk stratification models, or should they start their care/case management programs and then subsequently provide risk-coding education? From experience, I have seen both strategies carried out, but in my opinion, I think the best way to elicit change management is to generate the need first. Make providers and administrators bare the work upfront so that helpful programs initiated later on are greater appreciated with a much higher return on investment. A great way to implement an HCC coding initiative is by completing HCCs during annual wellness visits (AWV). Once a patient comes in for an AWV, the provider can review all chronic conditions, develop a care plan, and accurately code the patient’s risk. Subsequently, the provider can refer these patients into a chronic care management program.

We are in an instant gratification world with Amazon Prime, e-prescribing, Postmates, Uber, etc., but if you don’t appreciate the outcome, and if the program is set up without a well-developed plan, then the return on investment, both financially and emotionally, will not bear fruit. Do the early leg work. Educate providers on the most up to date coding methods. Put your upfront investment behind bolstering your care delivery teams, and acquire the technology to help you measure your outcomes. Then, when you’re satisfied with their coding performance, invest in comprehensive programs.

Programmatic change is difficult, and aspects of care that were historically undervalued are changing in status. It will take plenty of reinforcement, dedication, and properly aligned incentives to make the move, but ultimately, it is both the patient’s care and delivery system reform that should be at the forefront. Value-based care will result in a high return on investment, but it’s a long-term game. Invest in the egg so you have healthy chicken in the end.

1. https://www.bettermedicarealliance.org/sites/default/files/2017-07/Understanding%20Risk%20Adjustment_June2017.pdf

2. http://www.imcare.org/DocumentCenter/View/480/Risk-Adjustment-Coding-PDF

Amy Kotch

About the Author

Amy Kotch, MHA

Amy Kotch is Salient’s Lead Business Consultant working with ACOs nationwide. She received a masters in health administration from Florida Atlantic University as well as a bachelors of science from the University of Miami and has just recently completed a master certification in population health through a federal grant from the Office of the National Coordinator for Health Information Technology in conjunction with the Johns Hopkins University and Normandale Community College. Her prior work includes being the operations coordinator at Triple Aim Development Group consulting with ACOs/MSOs.

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