refinements to the cms-hcc model for risk adjustment of medicare capitation payments contact: john...
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Refinements to the CMS-HCC Model For Risk Adjustment of Medicare Capitation Payments
Contact: John Kautter, PhD, [email protected]
RTI International is a trade name of Research Triangle Institute.
Presented by:
John Kautter, Ph.D.Gregory Pope, M.S.Eric Olmsted, Ph.D.
RTI International
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History of Medicare Risk Adjustment
Demographics (AAPCC) Doesn’t explain cost variation Favorable selection => higher program costs
Principal inpatient diagnoses (PIP-DCG model, 2000) Incentive to admit Penalizes plans that avoid admissions
Inpatient and ambulatory diagnoses (2004)
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CMS-HCC Model
Centers for Medicare & Medicaid Services (CMS) Hierarchical Condition Categories (HCC) model
Prospective Inpatient and outpatient diagnoses w/o
distinction 70 diagnostic categories (HCCs) Hierarchical within diseases
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CMS-HCC Model (continued)
Cumulative (additive) across diseases
6 disease interactions
Discretionary diagnoses are excluded
Demographic factors included
Calibrated on 1999/2000 Medicare 5% Sample
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CMS-HCC Model Performance
Percentage of cost variation explained Age/Sex: 0.8% PIP-DCG: 5.5% CMS-HCC: 10.0%
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CMS-HCC Models for Medicare Subpopulations
Disabled
End-stage renal disease
Institutionalized
New enrollees
Secondary payer status
Frail elderly
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Disabled
Over 10% of Medicare population
Under age 65
Model estimated separately for aged and disabled Overall cost patterns similar For 5 diagnostic categories, incremental
expense of the disabled is higher
5 disease interactions for disabled in final CMS-HCC model
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End-Stage Renal Disease
About 1% of Medicare population
Very expensive: approximately $50,000/year
3-segment model Dialysis patients
CMS-HCC model calibrated on dialysis patients
Transplant period (3 months) Lump-sum payment
Post-transplant period Aged/disabled CMS-HCC model w/add-
on for drugs
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Institutionalized Beneficiaries
About 5% of Medicare population
Costly, but less expensive than community residents for same diagnostic profile
Combined CMS-HCC model Overpredicts costs for institutionalized Underpredicts costs for community frail
elderly
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Institutionalized Beneficiaries (continued)
Different cost patterns by age and diagnosis for community and institutionalized
CMS-HCC model calibrated separately on community and institutionalized
Current year institutional status reported by nursing homes
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New Enrollees
Lack 12 months of base year enrollment
Two-thirds are 65 year olds
New enrollees versus continuing enrollees Much less costly at age 65 Similar costs at other ages
Merged new/continuing enrollee sample
Separate cost weights for 65 year olds
Demographic model
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Medicare as Secondary Payer
Beneficiaries with active employee employer-sponsored insurance
Costs are lower
Multiplier scales cost predictions down
Multiplier is ratio of mean actual to mean predicted expenditures
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Frail Elderly
Diagnosis-based models underpredict expenditures for the functionally impaired
Medicare specialty plans (e.g., PACE) serve functionally-impaired populations
Frailty adjuster to better predict their costs Predicts costs unexplained by CMS-HCC Based on difficulties in ADLs ADLs collected from surveys or assessments
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CMS-HCC Model Refinements
Additional HCCs added to model
100% institutional sample used for institutional model calibration
Changes in diagnostic classification
2002/2003 Medicare FFS data used for calibration of all models
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Availability of Additional HCCs
For Part D risk adjuster, plans required to submit diagnoses for 127 HCCs
Additional 57 HCCs available for CMS-HCC models (127 – 70 = 57)
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Adding HCCs
Benefits Greater accuracy in predicting illness burden Rewards plans who enroll and treat
beneficiaries with these diagnoses E.g., Special Needs Plans (SNPs)
Drawbacks Creates greater opportunities for diagnostic
“upcoding”
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HCCs Added to CMS-HCC Model
Available additional HCCs reviewed by project team to determine which were appropriate for payment model
Number of HCCs increased from 70 to 101
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Examples of HCCs Added to CMS-HCC Model
“Refined” CMS-HCC Model
HCC CommunityInstitutional
Type IDiabetesMellitus $1,557 $1,435
Dementia/CerebralDegeneration $1,576 − −
Hypertension $388 $919
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100% Institutional Sample
CMS-HCC institutional model calibrated on 5% institutional sample (n = 65,593)
To increase statistical accuracy and stability, “refined” CMS-HCC institutional model calibrated on 100% institutional sample (n = 1,238,842)
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Distribution of Annualized Medicare Expenditures, 2003
5% Community 100% Institutional
Sample Size 1,380,978 1,238,842
ExpendituresMean $6,541 $11,252
95th Percentile $31,285 $47,39090th Percentile $17,682 $31,553Median $1,445 $3,02810th Percentile $56 $5385th Percentile $0 $349
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Changes in Diagnostic Classification
Diabetes complications moved to diabetes hierarchy E.g., diabetic neuropathy moved from HCC
71 Polyneuropathy to HCC 16 Diabetes with Neurologic or Other Specified Manifestation
HCC 119 Proliferative Diabetic Retinopathy and Vitreous Hemorrhage deleted and most moved to HCC 18 Diabetes with Ophthalmologic or Unspecified Manifestation
Cerebral Palsy consolidated in HCC 70 Cerebral Palsy and Muscular Distrophy
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Refined CMS-HCC Community and Institutional Models
% of CostVariationExplained # HCCs
CMS-HCCCommunity 9.8% 70Institutional 6.0% 69
“Refined” CMS-HCCCommunity 11.0% 101Institutional 8.9% 90
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Refined CMS-HCC Model Performance – I
Predictive ratios, prior year expenditure quintiles
Age/Sex CMS-HCC
First 2.65 1.20
Second 1.82 1.19
Third 1.31 1.09
Fourth 0.91 0.99
Fifth 0.46 0.90
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Refined CMS-HCC Model Performance – II
Predicted ratios by CMS-HCC predicted expenditure deciles
Age/Sex CMS-HCCFirst 2.84 0.88Second 2.43 0.92Third 2.10 0.94Fourth 1.70 0.97Fifth 1.49 0.97Sixth 1.27 1.00Seventh 1.06 1.01Eighth 0.86 1.04Ninth 0.64 1.04Tenth 0.35 1.00
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Conclusions
Medicare risk adjustment has been evolving Demographic Inpatient All-Encounter (AAPCC) (PIP-DCG) (CMS-HCC)
The “refined” CMS-HCC model represents a more comprehensive all-encounter risk adjustment model Increases payment accuracy for plans
Viability of plans
– Beneficiaries’ access to plans