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Refinements to the CMS-HCC Model For Risk Adjustment of Medicare Capitation Payments PowerPoint PPT Presentation


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Refinements to the CMS-HCC Model For Risk Adjustment of Medicare Capitation Payments. Presented by: John Kautter, Ph.D. Gregory Pope, M.S. Eric Olmsted, Ph.D. RTI International. Contact: John Kautter, PhD, [email protected] RTI International is a trade name of Research Triangle Institute.

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Refinements to the CMS-HCC Model For Risk Adjustment of Medicare Capitation Payments

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Refinements to the cms hcc model for risk adjustment of medicare capitation payments l.jpg

Refinements to the CMS-HCC Model For Risk Adjustment of Medicare Capitation Payments

Presented by:

John Kautter, Ph.D.

Gregory Pope, M.S.

Eric Olmsted, Ph.D.

RTI International

Contact: John Kautter, PhD, [email protected]

RTI International is a trade name of Research Triangle Institute.


History of medicare risk adjustment l.jpg

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


Disabled l.jpg

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

HCCCommunityInstitutional

Type I

Diabetes

Mellitus$1,557$1,435

Dementia/

Cerebral

Degeneration$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% Community100% Institutional

Sample Size 1,380,978 1,238,842

Expenditures

Mean $6,541 $11,252

95th Percentile $31,285 $47,390

90th Percentile $17,682 $31,553

Median $1,445 $3,028

10th Percentile $56 $538

5th 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


Refined cms hcc community and institutional models l.jpg

Refined CMS-HCC Community and Institutional Models

% of Cost

Variation

Explained# HCCs

CMS-HCC

Community9.8%70

Institutional6.0%69

“Refined” CMS-HCC

Community11.0%101

Institutional8.9%90


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Refined CMS-HCC Model Performance – I

  • Predictive ratios, prior year expenditure quintiles

    Age/SexCMS-HCC

    First2.651.20

    Second1.821.19

    Third1.311.09

    Fourth0.910.99

    Fifth0.460.90


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Refined CMS-HCC Model Performance – II

  • Predicted ratios by CMS-HCC predicted expenditure deciles

    Age/SexCMS-HCC

    First2.840.88

    Second2.430.92

    Third2.100.94

    Fourth1.700.97

    Fifth1.490.97

    Sixth1.271.00

    Seventh1.061.01

    Eighth0.861.04

    Ninth0.641.04

    Tenth0.351.00


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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


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