1. Risk Adjustment Models
Jung Ki Kim, Ph.D.
Judy Y. Yip, Ph.D.
Center for Long Term Care Integration

2. Risk Adjustment Models
Examines pre-existing patient factors that result in differences in the outcomes of analyses being conducted
Assessment and accountability
Risk of What
Health outcomes (mortality, morbidity, functioning)
Costs
Health care utilization

3. Dimensions of Risk Age, sex, race/ethnicity Acute clinical stability
Principal diagnosis
Severity of principal diagnosis
Extent and severity of co-morbidity
Physical functional status
Psychological, cognitive, and psychosocial function
Cultural and socioeconomic attributes and behaviors
Health status and quality of life
Patient attitudes and preferences for outcomes

4. Characteristics of a `GOOD` model
A suitable measures or model has to possess:
Predictive accuracy
Reliability
Resistance to gaming
Administration feasibility

5. Types of Risk Adjusters
Demographic
Claims-Diagnosis
Functional Status
OR any combination of the above

6. Risk Adjustment Models
Demographic Model
AAPCC
Diagnosis-based Model
DCG
PIPDCG
ADDCG
HCC
ACG
ADG-HosDom
ADG-MDC
DPS
CDPS

7. Medicare`s Adjusted Average per Capita Cost (AAPCC)
Age, sex, welfare status (Medicaid), and institutional status
Payment is set at 95% of Medicare expenditures predicted by the AAPCC
Adjusts the national average per capita cost of all Medicare beneficiaries to reflect the average cost in the county where the enrollees reside

8. Why Need to Improve the Risk Adjustment Methodology in Capitated Payment Systems?
Limitations of AAPCC
Inaccuracy
Unfairness
Accurate risk adjustment would
benefit plans by more fairly paying them if they were high risk persons
benefit HCFA by reducing the possibility of overpayment to plans for low-risk beneficiaries who on average use fewer services

10. Diagnostic Cost Group (DCG) Models
Developed by Boston University
Comprehensive clinical classification system; Groups individuals into clinically homogeneous groups
Used by HCFA to calculate health-based (risk-adjusted) payments for Medicare+Choice plans.

11. DCG Models (Cont`d)
PIPDCG (Principal inpatient DCG): Classifies people based on their single highest cost principal inpatient diagnosis
ADDCG (All-diagnoses DCG): Adds secondary inpatient, hospital outpatient, and physician diagnoses to the principal inpatient diagnosis, and classifies people based on their single highest predicted cost diagnosis
HCC (Hierarchical Coexisting Conditions): Accounts for multiple medical conditions; Sums the incremental predicted cost for each condition to arrive at the total predicted cost.

12. ACG (Adjusted Clinical Groups) and ADG (Ambulatory Diagnostic Groups) Models
Developed by Johns Hopkins University
ACG (Ambulatory Care Group)
PACS (Payment Amount for Capitated System)
ADG-MCD (Ambulatory Diagnostic Groups-Major Diagnostic Category)
ADG-HosDom (Ambulatory Diagnostic Groups-Hospital Dominant)

13. Disability Payment System (DPS)
Developed by Kronick and colleages
For Medicaid recipients with disability
The major chronic diagnostic categories are divided into 43 subcategories - severity subcategories (e.g. high-, medium- and low-cost cardiovascular).
CDPS (Chronic Illness and Disability Payment System) models

14. Current Use of Diagnostic-based Adjusters in Medicaid ( in 2000)
State Classification System
Maryland ACGs
Colorado DPS
Oregon DPS
Minnesota ACGs
Delaware CDPS
Michigan CDPS

15. Functional Status Risk Adjustment
Survey-based adjusters
Include health status risk adjusters such as individuals’ health perception, functional status/disability (ADLs and IADLs), self-reported clinical diagnoses, chronic disease risk

16. Good Models Ability to predict costs for individuals
Ability to predict costs for groups

17. Applications and Future Tasks
Prospective vs. concurrent models
Scope of diagnoses included in model
How to categorize diagnoses?
What kinds of diagnoses are included?
How many diagnoses are included?
Test different models with our Medicare and Medi-Cal population
Test different sub-groups of our data population
Develop new models with a new diagnostic system