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Every April, the Centers for Medicare & Medicaid Services (CMS) updates its Hierarchical Condition Categories (HCCs), which take effect the following year and directly impact Risk Adjustment Factor (RAF) scores for Medicare Advantage. At the same time, the Department of Health and Human Services (HHS) maintains a separate HCC model used for Affordable Care Act (ACA) marketplace plans. Though the models differ, both adjust payments based on patient health and complexity.
What are RAF scores?
RAF scores are numerical values that estimate a patient’s expected healthcare costs based on their clinical conditions and demographic details. These scores are central to risk adjustment models, ensuring that healthcare organizations are fairly reimbursed for treating patients with varying levels of complexity.
Each RAF score is influenced by factors such as age, gender, Medicaid status, and clinical diagnoses grouped into HCCs. The higher the score, the greater the predicted cost of care, and thus the higher the reimbursement to the provider or health plan.
The role of Hierarchical Condition Categories (HCCs) in risk adjustment coding
Central to the calculation of RAF scores is the HCC model. The system groups related diagnoses by complexity and cost, organizing them into hierarchies by severity. Each HCC is assigned a weight, contributing to a patient’s overall RAF score.
RAF scores play a critical role in value-based care and reimbursement, affecting stakeholders across the healthcare ecosystem. This guide breaks down RAF scores, how they’re calculated, and strategies for improving accuracy.
There are two major HCC models in use today:
- CMS-HCC: Used for Medicare Advantage patients (65+ or disabled)
- HHS-HCC: Used for ACA marketplace plans (commercial population)
While both models aim to estimate patient risk and adjust payments accordingly, they differ in structure, covered populations, and the conditions they emphasize. CMS-HCC uses prior-year data for older populations, while HHS-HCC relies on current-year data for broader commercial coverage.
How are RAF scores calculated?
RAF scores are calculated by combining demographic factors and the sum of all weighted HCCs assigned to a patient. Each data point contributes to a risk profile used to estimate the cost of care:
- Demographics: Age, gender, Medicaid status, and institutional living conditions
- Diagnoses: Mapped to HCCs, which each carry a specific weight
A simplified formula looks like this:
RAF score = Demographic factor + Sum of HCC diagnoses weights
Accurate and thorough clinical documentation is essential. If a condition isn’t documented and coded correctly, it won’t be included in the patient’s RAF score. This impacts care for complex patients and lowers reimbursement.
Strategies for ensuring accurate RAF scores
To improve RAF accuracy, organizations should focus on these three HCC management strategies:
- Leveraging industry-leading clinical terminology: IMO Health’s always maintained terminology enables accurate documentation at the point of care by mapping provider-friendly language to standard codes across all major electronic health records (EHRs), with tools to ensure ideal coding specificity and completeness. This ensures optimal HCC capture, especially during Annual Wellness Visits, where providers can confirm diagnoses for accurate RAF scores. As CMS transitioned from HCC Version 24 to 28, IMO Health tools kept up with the phase changes to ensure patient data remained compliant, supporting customers in optimizing CMS reimbursement.
- Conduct internal audits to ensure CMS documentation compliance: Regular internal audits and use of the M.E.A.T. framework (Monitor, Evaluate, Assess, Treat) ensure that diagnoses are medically necessary and audit-ready for Risk Adjustment Data Validation (RADV) compliance. Accurate documentation also supports Medicare Advantage Star Ratings, which influence Quality Bonus Payments (QBPs). IMO Health simplifies this process by flagging potential upcoding risks, suggesting more accurate alternatives directly in our problem list tooling for providers during encounters, and facilitating streamlined review of current medications and lab results related to a given diagnosis.
- Closing the provider-payer gap with smarter problem lists: Accurate risk adjustment hinges on a comprehensive view of a patient’s health. However, misaligned data between payers and providers often leads to missed details critical to RAF score accuracy. IMO Health’s problem list tooling bridges this gap by surfacing unaddressed HCCs from prior encounters, unstructured notes, and payer-sourced data. This integration strengthens provider-payer collaboration by streamlining risk adjustment, improving RAF accuracy, and enabling timely clinical interventions that enhance care coordination and reimbursement.
RAF scores are essential for accurate reimbursement and care planning in value-based models. Organizations can better capture patient complexity and secure appropriate reimbursement by improving documentation practices, adopting smart EHR tools, and fostering collaboration.
