Solving the mismatch between poor quality scores and outstanding care

January 29th, 2018 / By Kristine Daynes

Recently, I reviewed the Medicare Hospital Value-Based Purchasing (VBP) scores for three hospitals recognized nationally for outstanding care and patient safety. They didn’t look good. The ratings for clinical outcomes were worse than the national average, and the calculations of efficiency (average spending per Medicare beneficiary) placed the hospitals in the bottom twentieth percentile. Yet, last year, industry organizations such as Healthgrades and Becker’s Hospital Review recognized the same hospitals for excellence.

How can hospitals that provide outstanding care have such dumbfounding quality scores? The explanation lies in how quality is measured. Under the Medicare Hospital VBP Program, which impacts inpatient prospective payment, the domain scores for clinical outcomes and efficiency are risk adjusted using Hierarchical Condition Categories (HCCs). HCC risk scores are calculated from submitted claims for inpatient, outpatient, and professional services.

According to a revenue cycle manager for the hospitals, which are all part of the same health system, their HCC risk scores weren’t an accurate representation of how sick their patients truly were. Their hospital-based CDI and coding staffers were good at making sure MS-DRGs were accurately assigned to inpatient stays. But they didn’t know how claims for care provided outside the hospitals were affecting the HCC-based quality measures—or reimbursement.

Why are HCCs a challenge for providers?

Most hospitals are savvy about documenting and coding to accurately represent Medicare diagnosis-related groups. MS-DRGs group and risk adjust acute care by encounter. The results are used in calculating quality scores and reimbursement. HCCs group and risk adjust patient care, too, and are likewise used to calculate quality scores and reimbursement. In contrast, however, HCCs group and risk adjust patient care over a period of time, usually a year, across inpatient, outpatient and professional care settings. That makes it difficult for a hospital or hospital system to monitor HCC documentation and coding efforts claim by claim or for a single facility.

So much depends on physician documentation and coding. But, how is a physician to know whether a co-morbid HCC condition was diagnosed in another care setting last year, but not treated this year? And, even if they do treat and note all chronic conditions, how are they to adapt to HCC coding? Physicians are still paid primarily by procedures and E&M codes, not diagnoses. For them, making sure a secondary HCC diagnosis makes it on the bill doesn’t necessarily change the billed amount. As a result, current physician coding practices might not accurately represent all of a patient’s chronic conditions.

What makes health systems vulnerable to HCC risk?

The health system I evaluated—I’ll call it “Health System”—has more exposure to HCC risk adjustment than just the Medicare VBP Program. “Health System” has a joint venture, “Physician Partners,” with nearly 250 primary care physicians and specialists, most of whom are subject to MACRA (MIPS and APM). HCCs risk adjust several MIPS and APM measures used to determine Medicare physician payment.

“Health Network,” a subsidiary of “Health System,” functions as a clinically integrated network. The network launched a Medicare ACO in 2017 and plans to participate in an ACA plan offered on the state health insurance marketplace. HCCs risk adjust Medicare ACO payments and ACA health plan premiums.

(“Health System” does not own a Medicare Advantage plan, which is another way a hospital could be exposed to HCC risk. HCCs determine capitated payment for Medicare Advantage health coverage.)

How can a health system improve HCC risk adjustment?

In order to get fair reimbursement for treating Medicare and ACA beneficiaries, “Health System” needs to address their challenges with HCC management. Specifically:

  • Not all HCC diagnoses are getting captured in ambulatory documentation and coding
  • Revenue cycle managers cannot monitor HCC diagnoses and risk scores across the health network
  • Physicians across the enterprise cannot identify or prioritize patients at risk for missing HCCs

In response, the health system decided to invest in computer-assisted coding and analytics software to help them identify missing HCC diagnoses, schedule high-risk patients for doctor visits, connect physicians in clinics to hospitalists, and report on the status of HCC risk across the system.

“Health System” isn’t unusual in its vulnerability to HCC risk adjustment. Based on market and CMS data, I estimate well over 500 hospitals in about 140 health systems are exposed to HCC risk in a way that negatively impacts reimbursement. As Medicare and commercial payers shift financial accountability to providers, more hospitals and health systems will be exposed to HCC risk. Providers would be wise to follow the example of “Health System” to manage HCC risk adjustment across the enterprise, not by facility.

Kristine Daynes is client engagement leader, Performance Matrix, at 3M Health Information Systems.


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