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Diagnostic Cost Group Hierarchical Condition Category Models for Medicare Risk Adjustment Final Report

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Diagnostic Cost Group Hierarchical Condition Category Models for Medicare Risk Adjustment Final Report Diagnostic Cost Group Hierarchical Condition Category Models for Medicare Risk Adjustment Final Report Submitted by: Gregory C. Pope, M.S.1 Randall P. Ellis, Ph.D.2 Arlene S. Ash, Ph.D.3 John Z. Ayanian, M.D., M.P.P.4 David W. Bates, M.D., M.Sc.5 Helen Burstin, M.D., M.P.H.6 Lisa I. Iezzoni, M.D., M.Sc.7 Edward Marcantonio, M.D., S.M.8 Bei Wu, Ph.D.1 Affiliations: 1Health Economics Research, Inc. Waltham, MA 2Department of Economics, Boston University, Boston, MA 3Health Care Research Unit, Boston University School of Medicine, Boston, MA 4Associate Professor of Medicine and Health Care Policy, Harvard Medical School and Brigham and Women's Hospital 5Chief, Division of General Medicine, Brigham and Women's Hospital, Medical Director of Clinical and Quality Analysis, Partners Healthcare, Associate Professor of Medicine, Harvard Medical School 6Assistant Professor, Harvard Medical School (on leave) 7Professor of Medicine at Harvard Medical School and Co-Director of Research, Division of General Medicine and Primary Care, Beth Israel Deaconess Medical Center 8Assistant Professor of Medicine, Harvard Medical School, Director of Quality and Outcomes Research, Hebrew Rehabilitation Center for Aged Prepared for: Health Care Financing Administration December 21, 2000 This report is submitted under Contract No. 500-95-048, with the Health Care Financing Administration. The views and opinions expressed in this report are the authors�; no endorsement by HCFA is intended or should be inferred. The contractor assumes responsibility for the accuracy and completeness of information in this report. The authors thank Melvin J. Ingber, HCFA Project Officer, and other HCFA staff for their helpful suggestions and comments. In addition, the authors thank Sarita Bhalotra, M.D., Helen Margulis, Norma DiVito, and Victoria Barghout for their contributions to this project. Table of Contents Page Executive Summary .......................................................................................... ES-1 Chapter 1 Introduction and Overview ............................................................1-1 Chapter 2 File Construction .............................................................................2-1 2.1 Sample Selection..................................................................................................2-2 2.2 1997 Medicare Expenditures................................................................................2-4 2.3 Information Used for Risk Adjustment................................................................2-6 Chapter 3 Diagnostic Classification.................................................................3-1 3.1 Principles..............................................................................................................3-1 3.2 Elements and Organization ..................................................................................3-7 3.3 Examples ............................................................................................................3-12 Chapter 4 Diagnosis-Based Risk Adjustment Models ...................................4-1 4.1 Age/Sex Model.....................................................................................................4-2 4.2 Adding Diagnoses ................................................................................................4-2 4.3 Adding “Disabled” Interactions ...........................................................................4-3 4.4 Exclusions and Constraints ..................................................................................4-7 4.5 Adding Diagnosis Interactions.............................................................................4-8 4.6 Base Payment Model..........................................................................................4-12 4.7 Accuracy of Base Model for Medicare Subgroups ............................................4-13 4.8 Calibration of Medicaid and Originally Disabled Factors by Age/Sex Category .............................................................................................................4-20 4.9 Calibration of a Working Aged Multiplier.........................................................4-22 Chapter 5 Model Estimation and Validation with Additional Sources of Diagnoses ..........................................................................................5-1 5.1 Alternative Models...............................................................................................5-3 5.2 Results ..................................................................................................................5-4 5.3 Implications of Including or Omitting Diagnoses for Predicted Payments .........5-9 Chapter 6 Evaluation of Durable Medical Equipment as a Risk Adjuster .6-1 6.1 Durable Medical Equipment and Procedure Groups............................................6-4 6.2 Integrating DME and Procedures into Diagnostic Classification ........................6-5 6.3 Analysis of Predictive Power ...............................................................................6-8 Health Economics Research, Inc. DCG/HCC Models for Medicare Risk Adjustment: i Table of Contents (continued) Page Chapter 7 Concurrent DCG Modeling............................................................7-1 7.1 Overview ..............................................................................................................7-1 7.2 Process of Selection .............................................................................................7-4 7.3 Alternative Concurrent Models............................................................................7-7 References .......................................................................................................... R-1 Appendix A Health Economics Research, Inc. DCG/HCC Models for Medicare Risk Adjustment: ii Table of Tables and Figures Executive Summary Table ES-1 Diagnostic Cost Group Clinical Classifications Table ES-2 Predictive Power of All Encounter (DCG/HCC) Versus Inpatient (PIP-DCG) Models Table ES-3 Predictive Ratios for All Encounter (DCG/HCC) vs. Inpatient (PIP-DCG) Models: Selected Prior Year Diagnoses Table ES-4 Predictive Ratios for DCG All Encounter (DCG/HCC) vs. Inpatient (PIP-DCG) Models: Prior Year Expenditures Table ES-5 Predictive Ratios for All Encounter (DCG/HCC) vs. Inpatient (PIP-DCG) Models: Prior Year Hospitalizations Table ES-6 Predictive Accuracy of Revised All Encounter Model (DCG/HCC) Versus Previous All Encounter Model Table ES-7 Predictive Power of DCG/HCC Model Estimated with Alternative Diagnosis Sources Table ES-8 Predictive Accuracy of Alternative Risk Adjustment Models for Medicare Subgroups Chapter 1 Table 1-1 DCG All Encounter Medicare Model Development Team Chapter 2 Table 2-1 Exclusions to Create 1996/97 Prospective Modeling Sample Table 2-2 Distribution of Annualized 1997 Payments Table 2-3 Frequencies and Mean Payments for Medicare Subgroups: 1995/1996 and 1996/1997 Prospective Modeling Samples Table 2-4 Statistics on Components of 1997 Medicare Payments for Prospective Sample Chapter 3 Table 3-1 DCG Aggregations of ICD-9-CM Codes Table 3-2 Revised DCG/HCC Classification System Table 3-3 Descriptive Statistics on Prospective HCCs Table 3-4 Descriptive Statistics by HCC, Medicare Concurrent Sample, 1997 Health Economics Research, Inc. DCG/HCC Models for Medicare Risk Adjustment: iii Table of Tables and Figures (continued) Table 3-5 Clinical Vignette for DCG/HCC Classification 79 Year Old Woman with AMI, COPD, and Renal Insufficiency Table 3-6 Neoplasm Hierarchy Table 3-7 Selected Heart Disease HCCs Table 3-8 Coronary Heart Disease HCCs Table 3-9 Cerebrovascular Disease HCCs Table 3-10 Mental Illness HCCs Table 3-11 Psychiatric HCCs Chapter 4 Table 4-1 Age/Sex Model Table 4-2 Hierarchical Condition Categories Prospective Risk Adjustment Models Table 4-3 HCC Parameter Difference by Aged Versus Disabled Table 4-3A HCC Distribution on Aged Versus Disabled Table 4-4 Payment Differences for the Disabled: Differences Included in Base Model Table 4-5 Descriptive Statistics for Beneficiaries with Selected Multiple Diagnoses Table 4-6 Interactions Among Diagnoses: Interactions Included in Base Model Table 4-7 Frequencies and Mean Expenditures by Validation Group Table 4-8 Predictive Ratios for Age/Sex, All HCC, and Base HCC Models Table 4-9 Base HCC Model with Medicaid and Ever Disabled Factors Interacted with Age/Sex Table 4-10 Mean Actual and Predicted Expenditures by Age and Sex for Working Aged Chapter 5 Table 5-1 Classification of Sources of Diagnoses Table 5-2 HCC Prospective Risk Adjustment Models with Additional Sources of Diagnoses Table 5-3 Base HCC Model Estimated Excluding Diagnoses from RAPs and Clinically- Trained Non-Physicians Table 5-4 Predictive Power of Base Model Estimated with Alternative Diagnosis Sources Table 5-5 Predictive Ratios for Base HCC Model Estimated Using Alternative Sources of Diagnoses Health Economics Research, Inc. DCG/HCC Models for Medicare Risk Adjustment: iv Table of Tables and Figures (continued) Table 5-6 Twenty Five Highest Frequency Home Health Diagnoses Table 5-7 Twenty Five Highest Frequency DME Diagnoses Table 5-8 Aggregate Effect of Including and Omitting Various Sources of Diagnoses on Predicted Payments Prospective Payment Medicare Model (N = 1,394,701) Table 5-9 Detailed Effects of Including and Omitting Sources of Diagnoses on Predicted Payments by Validation Group Prospective Payment Medicare Model (N = 1,394,701) Chapter 6 Table 6-1 Descriptive
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