Jon Eisenhandler

Clinical Risk Groups (CRGs): A classification system for risk-adjusted capitation-based payment and health care management

ObjectiveTo develop Clinical Risk Groups (CRGs), a claims-based classification system for risk adjustment that assigns each individual to a single mutually exclusive risk group based on historical clinical and demographic characteristics to predict future use of healthcare resources. Study Design/Data SourcesWe developed CRGs through a highly iterative process of extensive clinical hypothesis generation followed by evaluation and verification with computerized claims-based databases containing inpatient and ambulatory information from 3 sources: a 5% sample of Medicare enrollees for years 1991–1994, a privately insured population enrolled during the same time period, and a Medicaid population with 2 years of data. ResultsWe created a system of 269 hierarchically ranked, mutually exclusive base-risk groups (Base CRGs) based on the presence of chronic diseases and combinations of chronic diseases. We subdivided Base CRGs by levels of severity of illness to yield a total of 1075 groups. We evaluated the predictive performance of the full CRG model with R2 calculations and obtained values of 11.88 for a Medicare validation data set without adjusting predicted payments for persons who died in the prediction year, and 10.88 with a death adjustment. A concurrent analysis, using diagnostic information from the same year as expenditures, yielded an R2 of 42.75 for 1994. ConclusionCRGs performance is comparable to other risk adjustment systems. CRGs have the potential to provide risk adjustment for capitated payment systems and management systems that support care pathways and case management.

Achieving cost control, care coordination, and quality improvement through incremental payment system reform.

The healthcare reform goal of increasing eligibility and coverage cannot be realized without simultaneously achieving control over healthcare costs. The reform of existing payment systems can provide the financial incentive for providers to deliver care in a more coordinated and efficient manner with minimal changes to existing payer and provider infrastructure. Pay for performance, best practice pricing, price discounting, alignment of incentives, the medical home, payment by episodes, and provider performance reports are a set of payment reforms that can result in lower costs, better coordination of care, improved quality of care, and increased consumer involvement. These reforms can produce immediate Medicare annual savings of

Bundling Post-Acute Care Services into MS-DRG Payments

10 billion and create the framework for future savings by establishing financial incentives for long-term provider behavior changes that can lead to lower costs.

Developing a prospective payment system based on episodes of care.

OBJECTIVE A bundled hospital payment system that encompasses both acute and post-acute care has been proposed as a means of creating financial incentives in the Medicare fee-for-service system to foster care coordination and to improve the current disorganized system of post care. The objective of this study was to evaluate the statistical stability of alternative designs of a hospital payment system that includes post-acute care services to determine the feasibility of using a combined hospital and post-acute care bundle as a unit of payment. METHODS The Medicare Severity-Diagnosis Related Groups (MS-DRGs) were subdivided into clinical subclasses that measured a patients chronic illness burden to test whether a patients chronic illness burden had a substantial impact on post-acute care expenditures. Using Medicare data the statistical performance of the MS-DRGs with and without the chronic illness subclasses was evaluated across a wide range of post-acute care windows and combinations of post-acute care service bundles using both submitted charges and Medicare payments. RESULTS The statistical performance of the MS-DRGs as measured by R(2) was consistently better when the chronic illness subclasses are included indicating that MS-DRGs by themselves are an inadequate unit of payment for post-acute care payment bundles. In general, R(2) values increased as the post-acute care window length increased and decreased as more services were added to the post-acute care bundle. DISCUSSION The study results suggest that it is feasible to develop a payment system that incorporates significant post-acute care services into the MS-DRG inpatient payment bundle. This expansion of the basic DRG payment approach can provide a strong financial incentive for providers to better coordinate care potentially leading to improved efficiency and outcome quality.

Ambulatory Patient Groups, Version 3.0--a classification system for payment of ambulatory visits.

A patient-centered approach to defining episodes of care around a hospitalization can provide the basis for creating expanded bundles of services that can be used as the basis of payment. Paying by episodes of care strengthens the incentive to providers to deliver care efficiently. A hospital-based episode of care prospective payment system can be phased in over time by gradually expanding the services and the time period included in the episode. Establishing equitable prospective episode payment amounts requires that the severity of illness of the patient during the hospitalization and the chronic disease burden of the patient be taken into account.

The prospective risk adjustment system.

The Ambulatory Patient Groups (APGs) are a patient classification system that was designed to be used as the basis of an Outpatient Prospective Payment System (OPPS). Although 6 major non-Medicare payers had implemented an APG-based OPPS between 1995 and 2000, the implementation of the Ambulatory Payment Classification (APC)-based Medicare OPPS shifted the focus of outpatient payment reform among payers to APC-based systems. Unfortunately, the APC OPPS is not really a prospective payment system and has become essentially a variant of a fee-for-service system. As a result, most major non-Medicare payers have rejected APCs as a model for outpatient payment reform and a renewed interest in the original APG OPPS design has occurred. This article reviews the basic components of an OPPS, compares and contrasts an APG- and APC-based OPPS, describes the differences between APG, Version 2.0, and APG, Version 3.0, and summarizes the key policy decisions payers will need to make in implementing an OPPS.

Adjusting Medicaid managed care payments for changes in health status.

The Episode Classification System is intended to perform two tasks. First, it will be a prospective capitation risk adjuster and predict future health care costs. It will do this by assigning each individual a single capitation risk adjustment category based on an analysis of the medical history and of health care services rendered during a specific period of time. Second, the Episode Classification System will create retrospective severity adjusted Episodes of illness or Episodes of Care. These latter Episodes will provide a framework for relating patient characteristics to the amount, type, and duration of services provided during the treatment of a specific disease. These Episodes will give users the ability to understand past costs and the risk of mortality. As such they will form the basis for provider profiling by allowing users to analyze a complete clinical episode.

Postadmission sepsis as a screen for quality problems: a case-control study.

Risk adjustment of managed care organization (MCO) payments is essential to avoid creating financial incentives for MCOs adopting enrollee selection strategies. However, all risk-adjustment methods have an inherent structural flaw that rewards preventable deterioration in enrollee health status and improved coding of disease burden. We propose a payment adjustment to offset this flaw. We use a database of 1,237,528 continuously enrolled beneficiaries to quantify the payment impact of change in enrollee health status over time for enrollees with two common chronic illnesses, hypertension and diabetes. The payment impact caused by the change in enrollee health status across MCOs ranged from +3.67% to −7.27% for enrollees with diabetes and from +5.25% to −7.69% for enrollees with hypertension. The MCO payment impact for diabetes and hypertension ranged from +0.19% to −0.31%. This difference can be used as the basis for creating payment incentives for MCOs to reduce the long-term costs of chronically ill enrollees.

Response to Comments on “Achieving Cost Control, Care coordination, and Quality Improvement Through Incremental Payment System Reform”

The present on admission (POA) indicator used with diagnosis codes listed in hospital discharge abstracts makes it possible to screen for possible in-hospital complications, which may in turn point to quality of care problems. A case–control study was performed among 382 patients from 30 New York State hospitals to see if lapses in quality were associated with the development of postadmission sepsis. Cases with hospital-acquired sepsis (labeled not POA) were compared with matched controls without sepsis. The authors found that central venous catheters and emergently inserted peripheral intravenous catheters were associated with subsequent development of sepsis. Urethral catheters were associated with sepsis for medical patients but not for surgical patients. Adherence to several process of care guidelines was incomplete but none occurred statistically significantly more frequently among sepsis cases than controls. Using discharge abstract diagnosis codes to determine the presence of postadmission complications shows promise for identifying areas for quality improvement.

Method of grouping and analyzing clinical risks, and system therefor

ALTHOUGH there is a wide range of reactions to some of the specific payment system reforms proposed in “Achieving cost control, care coordination, and quality improvement through incremental payment system reform,” there appears to be a general consensus that payment systems reform is needed and can be an essential incremental step toward creating a more rational healthcare system. The implementation of the Medicare inpatient prospective payment system (IPPS) is consistently regarded as the most significant and successful payment reform ever implemented. However, there has been little progress in building on the success of IPPS or in extending it to payment systems for nonhospital services. The responses included case study discussions on the implementation of some of the proposals (Murray, Quinn, Roohan, and Kelly), an in-depth discussion of a specific proposal (McGuire), and an discus-