Explain capitation risk adjustment and the purpose of risk adjustment methodologies (e.g., HCCs).

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Capitation means paying a fixed amount per member per period, regardless of how many services the member uses. Risk adjustment sits on top of that by accounting for differences in enrollees’ health status, so plans aren’t financially penalized for enrolling sicker, higher-cost individuals. The goal is to set payments closer to the expected cost of care for each member, which helps discourage driving away high-risk patients and encourages plans to provide appropriate care.

Hierarchical Condition Categories, or HCCs, are a way to classify a person’s diagnoses into risk weights that predict future medical costs. Each enrollee gets a risk score based on their diagnosed conditions, and those scores are used to adjust the capitation payment. This enables payments to reflect the actual health risk of the population served, not just the number of people or the services billed.

The other statements misstate core ideas: capitation is not payments per service; risk adjustment is not unnecessary; risk adjustment is not about penalizing sicker people; and HCCs are not hospital billing cost codes.