Guided Notes

Risk Adjustment & HCC Coding

How Medicare Advantage and ACOs use diagnosis codes to predict cost — HCC models, RAF scores, hierarchies, MEAT documentation, annual recapture and RADV audits.

What is risk adjustment?

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Health plans that take a fixed payment per member (e.g. Medicare Advantage, ACA plans, ACOs) are paid more for sicker members and less for healthier ones. Risk adjustment predicts each person's expected cost from: • demographics (age, sex, Medicaid eligibility, disability, institutional status), • diagnosis codes documented during the year, grouped into Hierarchical Condition Categories (HCCs).

The result is a Risk Adjustment Factor (RAF) score — 1.0 is average expected cost.

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