Hierarchical Condition Categories (HCCs) are a system of medical coding used to categorize patient diagnoses based on their severity and expected healthcare costs. Originally developed by the Centers for Medicare & Medicaid Services (CMS) for the Medicare Advantage (MA) program, HCCs are used to adjust payments to health plans based on the health status and demographic characteristics of enrollees. This ensures that health plans receive appropriate compensation for covering patients with more complex and costly medical conditions. HCCs are part of a risk adjustment model that CMS uses to predict healthcare costs for Medicare Advantage beneficiaries. The model assigns a risk score to each patient, which reflects their expected healthcare expenses based on their diagnoses and demographic factors such as age, gender, and Medicaid eligibility. The “hierarchical” aspect of HCCs refers to how related medical conditions are grouped and ranked. More severe conditions within the same category group take precedence over less severe ones. For example, a patient diagnosed with both “diabetes without complications” and “diabetes with complications” would be assigned the HCC corresponding to “diabetes with complications,” as it indicates a higher expected cost.