Risk, Revenue & Care: How HCC coding and RAF impact Value-Based Care Revenue and Patient Outcomes

The basics of RAF and how it is calculated.

Total HCCs for a single patient equal RAF score


Every VBC patient has a Risk Adjustment Factor (RAF) score, and the score follows the patient. The more medically complex diagnoses render a higher RAF score. The higher the score, the more resources required to care for that patient; therefore, Medicare pays more to care for that patient. No matter where the diagnoses and HCC codes originate, RAF scores follow the patient back to the group that has taken on risk for that patient. So if your patient sees a cardiologist and is diagnosed with afib, that will impact your capitated reimbursement from CMS. And that will also impact the care required to keep that patient healthy and out of avoidable hospitalizations.


Although there are 80+ HCC codes, Medicare has created 8 special groups of HCCs with similar diagnoses of differing severity: cancer, diabetes, COPD, renal disease, substance use disorder, cardiorespiratory failure, psychiatric disorders and pressure ulcers. HCC codes that belong to one of these groups may be overridden by a different HCC in the same group higher up the hierarchy.


For example HCCs 8-12 all involve cancer, from solid breast tumors to leukemia. If a patient has a cancer in HCC 8 and a cancer from HCC 11, the more serious category (HCC 8) will be the only one that is reimbursed. Also worth noting, lower numbered HCCs trump higher numbers in their group, and have a greater impact on RAF scores.


Medical complexity diagnosed & documented determines Reimbursement

CMS uses RAF scores to render capitated payments


As illustrated above, HCCs contribute to RAF through a somewhat complex relationship, but the key is accurate documentation of all patient conditions and treating the patient for the complexity that has been diagnosed. Each patient has a RAF score that typically falls within the range of 0.6 to 1.2. When looking at a risk contract, CMS reimburses for each patient according to their RAF score, adjusted for age, sex and regionally based on costs of care.


So the overall average RAF within a contract determines the overall reimbursement for that population. The payments are termed capitated (from the Latin word for head) as it is paid “per head” rather than per-action, or CPT codes submitted in a FFS arrangement. Often, revenue is looked at in a per-member per-month average (PMPM), where the total population RAF and the total PMPM capitated payments are reviewed to determine how well a contract aligns with regional averages, numbers per clinic, or per doctor’s panel.

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