HCC: Hierarchical Condition Categories = Handouts of Cash for Crooks

Finally, the Fed is catching on and proposing a way to stop the private Medicare Advantage plans from siphoning money in fraudulent ways. This is a quote from a recent article in The New York Times:

The change in payment formulas is an effort, Biden administration officials say, to tackle widespread abuses and fraud in the increasingly popular private program. In the last decade, reams of evidence uncovered in lawsuits and audits revealed systematic overbilling of the government.

The instrument that was designed to help Medicare budget by getting more precise diagnoses is called Hierarchical Condition Categories, or HCC. The more specific my diagnosis coding is for each patient, the more accurately Medicare can predict their cost. Compared to the average cost for a patient, a diabetic without complications is 10% more expensive, and one with kidney disease is predicted to cost 30% more to care for. This HCC coding translates into what is called a risk adjustment factor, RAF. This is expressed as 0.105 or 0.302, which is added to the universal, healthy person’s RAF of 1.

There is a huge push to get providers to code this way, and it is starting to make some difference in how much money our clinics make, but so far it is in the form of bonuses or “shared savings”. But for Medicare Advantage plans, this is cold hard cash. And this has caused a feeding frenzy.

The instrument for collecting this data is our billing codes. At least once a year, every diagnosis that is worth more because of a risk adjustment factor greater than zero, should be billed. If I forget to use the code for morbid obesity (which is only a BMI of 35 or more if you have a condition like hypertension that may be related to it) or amputation status, Medicare will underestimate the cost to care for that patient and I will look like I overcharged and overtreated a healthy person.

And, again, I may not see the benefit or punishment my coding theoretically causes, yet, although I probably will see more and more of this effect as time goes on. But the Medicare Advantage plans have benefited handsomely from this.

Two things have happened.

One is that providers like me get letters, in some cases with promises of a $100 payment, asking me to verify diagnoses my patient appears to have, based on claims data.

The other is that the Advantage plan sends a Nurse Practitioner or an MD to the patient’s home to conduct an Annual Wellness Visit and submit a bill to CMS so that the plan gets credit for all those diagnoses.

They want this so badly that they’ll still pay me for doing my own Wellness Visit with my patient.

Quoting from The New York Times:

But numerous studies from academic researchers, government watchdog agencies and federal fraud prosecutions underscore how the insurers have manipulated the system by attaching as many diagnosis codes as possible to their patients’ records to harvest these bonus payments.

Four of the largest five insurers have either settled or are currently facing lawsuits claiming fraudulent coding. Similar lawsuits have also been brought against an array of smaller health plans.

And apparently (I don’t have a TV, but I read about it) now the Medicare Advantage plans are running TV ad campaigns that insinuate CMS is trying to cut member benefits, when all they are doing is trying to clamp down the plans’ abuse of the system.

There are actually two kinds of abuse by the Medicare Advantage plans going on, overcharging the government and shortchanging their patients by refusing to pay for expensive testing, like CT scans, necessary to diagnose cancer and other life threatening diseases.

The Cruelty of Managed Medicare

2 Responses to “HCC: Hierarchical Condition Categories = Handouts of Cash for Crooks”

  1. 1 Charlotte Duncan March 26, 2023 at 2:03 pm

    I received a bill for $114,000 for having two stents put into my femoral artery. No one could tell me how the bill could be that high, but through discounts, etc., I ended up owing nothing. Talk about fancy bookkeeping.

  2. 2 Allen W. Ditto, M.D. March 27, 2023 at 11:51 am

    Your column is quite accurate and prescient. “Medicare Advantage” programs are NOT Medicare but actually private insurance that is funded with Medicare dollars. The idea came about in the early 2000s that doing this would introduce “private business” into Medicare and ultimately stimulate competition, and increase efficiency, with the result to save money. Just the opposite has happened. Medicare Advantage programs have been quite efficiently “gaming” the system, denying care, and robustly recruiting Medicare-eligible customers through extensive ad campaigns with promises of “free” gym memberships, no co-pays, no premiums, and the like. They have proven to be extremely profitable for private insurance companies and are costing Medicare a bundle. They are beloved by those customers who never use them as they do cost the patient less upfront than standard Medicare (as co-pays and deductibles are often waived or there just are none). Unfortunately, most Medicare-aged patients do end up utilizing their health insurance and that is where the problem with the Advantage plans occurs. For example, up to 70 percent or more of Advantage plan care denials are overturned on appeal. That is outrageous and indicates some sort of severe problem with the preauthorization of care. Care is often denied if the patient travels and is “out of network” or if deemed “medically unnecessary.” The Advantage companies are now saturating the airwaves (or cable) with ads alleging that any attempt at reforming the Advantage plans to help put truth in advertising and implementing them amounts to the federal government attempting to “cut back or reduce your Medicare” benefit. What a load of malarky. The Advantage programs are NOT Medicare.

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Osler said “Listen to your patient, he is telling you the diagnosis”. Duvefelt says “Listen to your patient, he is telling you what kind of doctor he needs you to be”.


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