What HCC is
HCC stands for Hierarchical Condition Category. It is a grouping used by the Centers for Medicare and Medicaid Services (CMS) in its risk-adjustment model. Each HCC bundles a set of clinically related ICD-10 diagnosis codes, the standard codes physicians use to record conditions, into one category that carries a single coefficient.
That coefficient feeds the member's Risk Adjustment Factor (RAF), the score CMS uses to set risk-adjusted payment for Medicare Advantage plans and other risk-bearing organizations. A healthier member with few qualifying HCCs has a low RAF. A member with multiple serious chronic conditions, each mapping to its own HCC, has a higher RAF and draws higher payment to fund their care.
The word "hierarchical" is load-bearing. HCCs are arranged into clinical hierarchies, and within a given hierarchy only the most severe category counts. Documenting more conditions in the same hierarchy does not stack their coefficients.
Why HCC matters
HCCs are the unit of account for risk-adjusted revenue. For a risk-bearing group, the difference between a captured HCC and a missed one is the difference between being paid for the care a member actually needs and absorbing that cost unfunded. Across a panel of tens of thousands of members, small per-member capture gaps compound into large revenue swings.
The stakes are also compliance stakes. An HCC that is captured but not supported by documentation is exposure, not revenue. CMS recovers overpayments through audits, so the goal is not maximum capture but accurate, defensible capture: every coded HCC backed by a clinical note that would survive review.
How HCC works and is calculated
Three mechanics govern how an HCC contributes to a member's score:
- Hierarchies and trumping. Only the most severe HCC in a given hierarchy counts toward the score. Diabetes with complications trumps diabetes without complications, so coding both does not add their coefficients. Only the higher-weighted category contributes.
- Annual documentation. Chronic conditions must be documented in a face-to-face encounter during each calendar year to count toward that year's payment. An HCC captured last year does not carry forward on its own. It has to be recaptured, with a fresh qualifying encounter, every year.
- Model version. The category set depends on the model version. V24 had 86 HCC categories. V28 expanded the set to 115 categories, with a tighter ICD-10 crosswalk, so some diagnoses that triggered an HCC under V24 no longer do.
A member's RAF is the sum of the coefficients from all qualifying HCCs, after trumping is applied, plus demographic factors. The HCCs are the inputs. The RAF is the output that drives payment.
Common mistakes teams make with HCC
- Treating last year's capture as this year's. Chronic HCCs must be re-documented every calendar year. Teams that assume a prior-year diagnosis carries forward lose the coefficient silently.
- Ignoring trumping. Coding every condition in a hierarchy wastes effort and can create audit noise. Only the most severe category in a hierarchy counts, so trumping logic should be applied before submission, not after.
- Running V24-era playbooks under V28. The crosswalk shrank from V24 to V28. Codes that used to map to an HCC may not anymore, so capture lists built on the old mapping leak.
- Capturing without documentation. An HCC on the claim that is not supported by a clinical note is a future recovery, not revenue. Documentation should be attached to the capture, not reconstructed during an audit.
- Flagging gaps after the encounter. If the prompt to confirm a condition arrives after the visit, the recapture window is often already lost. The flag has to reach the provider at the point of care.
How Pelica handles HCC
Pelica's Risk Adjustment Copilot surfaces at-risk HCCs at the point of care, applies trumping logic in real time, and attaches the supporting documentation as each condition is confirmed. Across Pelica deployments, customers have lifted RAF by roughly +0.4 in two quarters with no new headcount.
Related terms
HCCs sit at the center of a cluster of risk-adjustment concepts. The RAF score is the sum of HCC coefficients plus demographics. The V28 model changed which diagnoses map to which HCCs, while the prior V24 model used a larger crosswalk. RADV audits test whether each captured HCC is supported by documentation.