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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 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 Medicare Capitation Payments

  • 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)


Cms hcc model l.jpg
CMS-HCC Model Medicare Capitation Payments

  • 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


Cms hcc model continued l.jpg
CMS-HCC Model (continued) Medicare Capitation Payments

  • Cumulative (additive) across diseases

  • 6 disease interactions

  • Discretionary diagnoses are excluded

  • Demographic factors included

  • Calibrated on 1999/2000 Medicare 5% Sample


Cms hcc model performance l.jpg
CMS-HCC Model Performance Medicare Capitation Payments

  • Percentage of cost variation explained

    • Age/Sex: 0.8%

    • PIP-DCG: 5.5%

    • CMS-HCC: 10.0%


Cms hcc models for medicare subpopulations l.jpg
CMS-HCC Models for Medicare Subpopulations Medicare Capitation Payments

  • Disabled

  • End-stage renal disease

  • Institutionalized

  • New enrollees

  • Secondary payer status

  • Frail elderly


Disabled l.jpg
Disabled Medicare Capitation Payments

  • 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


End stage renal disease l.jpg
End-Stage Renal Disease Medicare Capitation Payments

  • 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


Institutionalized beneficiaries l.jpg
Institutionalized Beneficiaries Medicare Capitation Payments

  • 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


Institutionalized beneficiaries continued l.jpg
Institutionalized Beneficiaries (continued) Medicare Capitation Payments

  • 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


New enrollees l.jpg
New Enrollees Medicare Capitation Payments

  • 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


Medicare as secondary payer l.jpg
Medicare as Secondary Payer Medicare Capitation Payments

  • 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


Frail elderly l.jpg
Frail Elderly Medicare Capitation Payments

  • 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


Cms hcc model refinements l.jpg
CMS-HCC Model Refinements Medicare Capitation Payments

  • 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


Availability of additional hccs l.jpg
Availability of Additional HCCs Medicare Capitation Payments

  • For Part D risk adjuster, plans required to submit diagnoses for 127 HCCs

  • Additional 57 HCCs available for CMS-HCC models (127 – 70 = 57)


Adding hccs l.jpg
Adding HCCs Medicare Capitation Payments

  • 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”


Hccs added to cms hcc model l.jpg
HCCs Added to CMS-HCC Model Medicare Capitation Payments

  • Available additional HCCs reviewed by project team to determine which were appropriate for payment model

  • Number of HCCs increased from 70 to 101


Examples of hccs added to cms hcc model l.jpg
Examples of HCCs Added to CMS-HCC Model Medicare Capitation Payments

“Refined” CMS-HCC Model

HCCCommunityInstitutional

Type I

Diabetes

Mellitus $1,557 $1,435

Dementia/

Cerebral

Degeneration $1,576 − −

Hypertension $388 $919


100 institutional sample l.jpg
100% Institutional Sample Medicare Capitation Payments

  • 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)


Distribution of annualized medicare expenditures 2003 l.jpg
Distribution of Annualized Medicare Expenditures, 2003 Medicare Capitation Payments

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


Changes in diagnostic classification l.jpg
Changes in Diagnostic Classification Medicare Capitation Payments

  • 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 Medicare Capitation Payments

% of Cost

Variation

Explained# HCCs

CMS-HCC

Community 9.8% 70

Institutional 6.0% 69

“Refined” CMS-HCC

Community 11.0% 101

Institutional 8.9% 90


Refined cms hcc model performance i l.jpg
Refined CMS-HCC Model Performance – I Medicare Capitation Payments

  • Predictive ratios, prior year expenditure quintiles

    Age/SexCMS-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


Refined cms hcc model performance ii l.jpg
Refined CMS-HCC Model Performance – II Medicare Capitation Payments

  • Predicted ratios by CMS-HCC predicted expenditure deciles

    Age/SexCMS-HCC

    First 2.84 0.88

    Second 2.43 0.92

    Third 2.10 0.94

    Fourth 1.70 0.97

    Fifth 1.49 0.97

    Sixth 1.27 1.00

    Seventh 1.06 1.01

    Eighth 0.86 1.04

    Ninth 0.64 1.04

    Tenth 0.35 1.00


Conclusions l.jpg
Conclusions Medicare Capitation Payments

  • 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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