Two Key Changes to the CMS-HCC 2020 Model

Kathy Ormsby, CPCO, CPC

qrcAnalytics Vice President of Compliance and Analytics


 Medicare Advantage (MA, also known as Medicare Part C) is an alternative coverage plan for Medicare beneficiaries to receive medical benefits as well as an alternative system under which Medicare pays the health care provider.  Under MA, private health plans are paid monthly per beneficiary or member, with the provider then responsible to provide equivalent or more Medicare benefits included in Part A and B. Therefore, rather than the historical Fee for Service (“FFS”) plan (Medicare parts A and B), the provider receives a monthly capitation fee per member based in part on how sick the member is regardless of how many services are provided. The MA capitated payment relies on a predetermined benchmark and the benchmark is updated annually in the Advance Notice. The Secretary of Health and Human Services publishes the Advance Notice of Methodological Changes, also known as the Advanced Call Letter.  The notice provides preliminary estimates of spending growth and is intended to inform healthcare organizations, providers and payors of key information affecting the model.  Along with the need for accurate and complete Hierarchical Condition Category (“HCC”) coding (see previous white papers and blogs issued by qrcAnalytics, Inc.), providers need a complete understanding of the annual Advanced Call Letter to ensure the receipt of appropriate remuneration from the Centers for Medicare and Medicaid Services (“CMS”).  This blog provides a brief analysis and summary of two key changes for calendar year 2020.


CMS typically publishes yearly changes to the MA model in three steps.  For the 2019 changes, those steps were accomplished by preliminary notices in December 2018 and January 2019 proposing the changes and eliciting comments and feedback from all stakeholders; the Final Notice was issued on April 1, 2019 and the rule changes went into effect on January 1, 2020.

Two Key Changes to the CMS-HCC Risk Adjustment Model

  • CMS will use the Alternative Payment Condition Count (“APCC”) model which includes:
    • Additional HCCs for Dementia and Pressure Ulcers.(1)
    • Additional variables that account for the number of conditions(1)
  • CMS requires that risk score calculations reflect a blending from various areas:
    • 50% of the risk score will be derived by using the 2017 CMS-HCC model that relies on diagnoses from the Risk Adjustment Processing System (“RAPS”) and FFS providers.(1)
    • The other 50% of the risk score will be calculated using the APCC model, melding the diagnoses from encounter data, RAPS inpatient records, and FFS.(1)

The most significant change in the above rules is the incorporation of encounter data into the Risk Adjustment scoring model.  Therefore, providers must now incorporate procedures to verify that encounter data is complete and accurate thereby ensuring that all claim submissions comply with CMS regulations.



Successful Medicare Advantage organizations utilize a well-designed risk adjustment strategy specific to their member populations. The strategy should include analyzation of data sources and an understanding of the differences between RAPS, encounter and FFS data. Healthcare organizations should have documented processes and procedures that ensure the data submitted is correct and are capturing all the correct HCCs from these specific data sources.

HCC Coding:

CMS added new HCCs to the model for 2020 and continue to keep a watchful eye on the integrity of the data submitted by health care providers. With the continued scrutiny on proper documentation and coding, successful healthcare organizations should stay updated on the codes that are added or deleted from the model and have processes in place to ensure that the integrity of the data submitted will pass the regulatory scrutiny that surrounds coding and documentation. Healthcare organizations that understand the importance of HCC coding do well when they routinely identify the specific sources of errors in claims and educate the personnel (e.g. physicians, nurses, coders, etc.) that fall short.

2020 Medicare Advantage and Part D Rate Announcement and Final Call Letter (footnote reference the formal title of the April 1, 2019 letter)

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