Definition
Hierarchical Condition Category (HCC)
A Hierarchical Condition Category (HCC) is a group of related diagnosis codes used in risk adjustment models, such as the CMS-HCC model for Medicare Advantage, to predict expected health care costs for a person and adjust payments.
1 min readReviewed September 14, 2026
Also known as: CMS-HCC model, HCC coding, HCC risk score, RAF score, Risk adjustment factor
Key facts
- Maintained by
- CMS for Medicare models; HHS for the ACA individual and small group model
- Medicare Advantage model
- CMS-HCC Version 28 (V28), fully phased in for payment year 2026
- V28 phase-in
- 33 percent in 2024, 67 percent in 2025, 100 percent in 2026
- Input codes
- ICD-10-CM diagnoses from accepted encounter types
- Related models
- RxHCC (Part D), ESRD model, HHS-HCC (ACA markets)
What is a Hierarchical Condition Category?
Thousands of ICD-10-CM diagnosis codes map into a much smaller set of condition categories with similar clinical meaning and expected cost. The categories are hierarchical: when a patient has related conditions of different severity, only the most severe category in that family counts, so diabetes with complications displaces diabetes without complications.
HCCs are the building blocks of the CMS-HCC model, which CMS uses to risk adjust payments to Medicare Advantage plans. The current version, V28, has 115 payment HCCs and was fully phased in for payment year 2026, replacing the earlier V24 model.
How HCC risk scores are calculated
Each beneficiary receives a risk score, often called a risk adjustment factor (RAF) score:
- Demographic factors such as age, sex, Medicaid status and original reason for Medicare entitlement each carry a coefficient.
- Each HCC the person has, after hierarchies are applied, adds its own coefficient, and some models add terms for condition combinations.
- CMS sums the coefficients, then applies normalization and a coding intensity adjustment before the score scales plan payment.
- The model is prospective: diagnoses from one year set payment for the next, so chronic conditions must be documented again every year.
Why HCCs matter
HCC coding directly affects Medicare Advantage revenue, so plans and risk-bearing provider groups invest in documentation, chart review and annual visits that capture chronic conditions. HCC risk scores also feed Shared Savings Program benchmarks, bringing the same incentives to accountable care organizations.
Risk scores explain why raw spending comparisons across plans, markets or provider groups mislead: a population with more HCCs is expected to cost more. The models are also under close federal scrutiny. CMS audits Medicare Advantage diagnoses through Risk Adjustment Data Validation (RADV), and the V28 revision removed many codes CMS considered subject to discretionary coding variation.