1. Academy Health Conference
Better Provider Profiling: Adding Patient Risk Adjustment to Episodes
Rong Yi, Senior Research Associate, DxCG Inc.
Academy Health Conference
June 6, 2004

2. Questions Keeping Us Up at Night:
The credibility of a provider profiling initiative depends largely on how well we can respond to the ‘my patients are sicker” objection.
How much do patient comorbidities affect episode costs?
Could we use the DCG Relative Risk Score that measures patient risk along with Medstat’s Episode Group method to more accurately determine expected costs?
How do severity and risk-adjusted episodes change our provider profiling results?

3. Presentation Outline Project objectives Proposed methodology
Application to BCBS of South Carolina’s provider profiles
Conclusions

4. MEGs Medstat’s Episodes Grouper
Look-back
Episode
Clean Period
Lab
Office
Visit
Prescription
Hospital
Admission
Office
Visit
Office
Visit
Links together a patient’s claims into a clinically meaningful episode across care settings
Calculates summary episode cost and utilization metrics
Assigns a managing physician to the episode to support profiling
Determines the disease stage of the episode (highest)

5. Diagnosis Information
DxCG’s DCG/HCC Models
Clinical Categories
DCG Model
Diagnosis Information
Age/Sex
Patient Risk Scores
Developed using regression methods on Medstat’s MarketScan database (commercial model)
Model input includes demographic information and all diagnosis information (and/or drug information) for a patient for a period (typically a year)
Assigns a set of risk scores to the patient that measures current and future risk (used for adjustment in profiling and predictive modeling).

6. DCG – Calculating a Patient’s Risk Score
year old male
Condition Categories
5.71 Diabetes with renal manifestation
1.84 Congestive heart failure
0.90 Acute myocardial infarction
Vascular disease with complication
0 Vascular disease hierarchy
18.09 Dialysis status
… ……
0.46 Diabetes & congestive heart failure
interaction
______
29.34 Relative Risk Score
Member ID: Name: John Smith Age: 54
Sex: M Rel Risk Score:

7. How Much Should an Episode Cost? - Depends on the patient!
Average Episode Cost
DCG Risk Score
(Health Burden,
1.0 = Avg)
Whole Patient Cost Next Year
Risk-Adjusted Episode Cost
45 year old female Healthy
$300
0.80
$1,500 ??
55 year old male Early Chronic
2.40
$4,500
64 year old female Chronic with Complications
7.20
$12,500

8. Cost of Pneumonia and Patient Risk (DCGs)
Stage
# of Episodes
Episode Cost
Avg DCG Risk Score 1 2 5 10
3,918
$286
2.88
1,345
841
904
389
439
$171
$246
$335
$378
$807 82
$350
2.66 34 14 9 11
$56
$166
$623
$368
$2,308 3 69
$310
2.60 43 8 4
$37
$118
$44
$89
$4,371
Overall
4,069
$296
2.87
DCG Risk Score
Healthier..……………… Sicker

9. Cost of Chronic Diabetes Patient Risk (DCGs)
Stage
# of Episodes
Episode Cost
DCG Risk Score 1 2 5 10
7,972
$354
3.01
2,856
1,900
1,969
962
485
$132
$308
$389
$536
$527
2,707
$1,133
5.32
587
599
776
371
374
$248
$562
$862
$1,815
$2,224 3 44
$1,604
9.62 15 13
$28
$113
$171
$1,726
$5,111
Overall
10,723
$556
3.62
DCG Risk Score
Healthier..……………… Sicker

10. Overall Relationship between Episode Disease Stage and Patient Illness Burden
Ordinal Stage
# of Episodes
Mean Patient
Risk Score
Range
409,317
1.3
(0.1, 56.4) 1
962,946
2.1
(0.1, 52.5) 2
73,866
3.2 3
10,491
5.1
Table: mean RRS by disease stages, overall correlation between disease stage and RRS, overall correlation between RRS and cost of episode. (done)
Stages are not comparable across MEGs, but broadly higher stages go with higher risk scores.

11. Risk-Adjusted Episodes in Provider Profiling
Problem: While episodes can be severity-adjusted, without adjusting for patient risk, there is the potential to unfairly reward physicians who care for patients with few co-morbid diseases and penalize those who effectively care for patients with significant disease burden.
Proposed solution: Marry the patient-level risk scores from DxCG with the severity score within Medstat’s Episodes Grouper to fairly evaluate physicians and pay for the best performance.
Medstat’s
Episodes Grouper
Severity-adjustment
within Episode
DxCG’s HCC Model
Whole-patient
Relative Risk Score
Risk-adjusted
Episodes

12. Developing the Risk-Adjusted Episode Model
MarketScan database
Only complete episodes with enough time for claim run-out
20 million episodes in 2002
Regression models incorporating
MEG
Disease Stage
DCG/HCC Prospective Relative Risk Score
Predict episode cost within each MEG
Representing roughly 1.5 million enrolled members, privately insured, about 60% in FFS, with diagnostic information from all sites of service, and with prescription drug benefits.

13. Improvements in Predictive Power (R2)
R2 measured at individual episode level.

14. Overview of BCBS of South Carolina’s Profiling Efforts
1+ million enrolled members
Provider Contracting deals with over 1600 physicians
Profiling effort began in 1998, using the MEGs.
Profile specialists with more than 100 members on episode cost and use information and compare to specialist norms

15. Risk-Adjusted Episode Profile for Internal Medicine / General Practice
BASE
BASE + DCG
Managing Phys
Episodes
Mean Actual
Mean Exp
Perf Ratio
Perf Ratio Change A
1,199
$413
$458
0.90
$439
0.94
-3.90% B
1,131
$433
$500
0.87
$507
0.86
-1.10% C
1,065
$451
$502
$504
-0.30% D
633
$746
$608
1.23
$566
1.32
9.10% E
704
$665
$486
1.37
$477
1.40
2.70% F
919
$495
$528
$487
1.02
7.80% G
835
$514
$478
1.08
$471
1.09
1.70% H
356
$1,091
$757
1.44
$974
1.12
-32.10% I
616
$629
$600
1.05
$632
1.00
5.30%

16. Performance Ratios by Physician
Performance ratios for most physicians (the ratio of actual $ / expected $) are similar between the two methods.
Some physicians performance ratio changes significantly when we add patient risk to the adjustment.
Adjusted using
episode group and stage
Adjusted using episode
group, stage and
patient risk
Physician H moved from
an outlier to practicing
within expected range
Physician D is even
more of an outlier

17. Physician D – Drill Down
Episode Description
Episodes
Actual Payments
Exp Payments (BASE)
Exp (BASE+DCG)
Actual RRS
Expected Average RRS
Other Nutritional and Metabolic Disorders 91
$373
$260
$264
1.58
2.13
Essential Hypertension, Chronic Maintenance 88
$640
$614
2.00
2.45
Other General Signs, Symptoms, and Conditions 47
$343
$366
$322
1.64
2.55
Other Ear, Nose, and Throat Infections 27
$158
$148
$141
1.46
1.97
Osteoarthritis 25
$2,443
$1,462
$1,139
1.78
2.82
Other Spinal and Back Disorders 21
$398
$505
$430
1.47
2.52
Other Respiratory Symptoms 19
$608
$776
$717
1.79
2.90
This physician’s patients have consistently lower illness burden than expected.

18. Physician H Drill Down
Episode Description
Episodes
Actual Allowed Payments per Episode
Exp Allowed Payments per Episode (MEG)
Exp Allowed Payments per Episode (MEG & DCG)
Actual RRS
Exp Average RRS
Essential Hypertension, Chronic Maintenance 40
$729
$620
$698
4.12
2.42
Other Nutritional and Metabolic Disorders 29
$485
$260
$264
2.04
2.13
Diabetes Mellitus Type 2 and Hyperglycemic States Maint 26
$1,656
$1,360
$1,478
6.1
3.7
Hernia, Hiatal or Reflux Esophagitis 12
$880
$501
$497
2.34
2.39
Renal Failure 9
$13,110
$2,992
$10,585
15.97
7.01
Angina Pectoris
$1,180
$5,189
$4,622
3.4
4.78
Physician H moves from an outlier to within the norm due to treating more severely ill patients.

19. Conclusions
Episode costs increase with the severity of the disease (MEG) and disease burden of the patient (RRS)
Considerable variation in episode costs leaves room for risk adjustment
Organizations can improve the accuracy of provider performance assessments using risk-adjusted episodes. This is important for ensuring equitable pay-for-performance.
Plans are underway to incorporate risk-adjusted episodes into the Medstat’s standalone episode grouper and Advantage Suite.