Exploring Episode-Based Approaches for Medicare Performance Measurement, Accountability and Payment Final Report. About This Report


The Assistant Secretary for Planning and Evaluation (ASPE) contracted with RAND in September 2007 to examine episodes of care for different clinical events/conditions and to consider ways in which the alignment of quality and financial incentives could be improved within the current Medicare payment and performance measurement systems and to explore broader episode-based performance and payment reforms to encourage coordination, shared accountability and efficiency. To address selected policy questions related to the potential use of episodes of care for performance measurement, payment, and value-based purchasing (VBP), the project is applying two commercially available episode groupers, the Symmetry Episode Treatment Groups (ETGs) and the Thomson Healthcare Medical Episode Grouper (MEG), on Medicare claims data for 2004 - 2006 from three states. 

The project is using a “building block” framework to examine the construction and application of episodes of care.  In the context of a building block approach, an episode of care could be constructed (1) narrowly to reflect the services delivered by one provider in a single setting for a specific illness or injury, (2) more broadly to reflect the services delivered in a single setting by multiple providers, such as the physician and the hospital during an inpatient stay, (3) very broadly to encompass the entire continuum of services received across multiple settings and providers for treatment/management of a specific condition, or (4) other variations along this continuum.

Analyses of the output from the grouper software runs focused on specific clinical conditions and will utilize three definitions of episodes of care that start from the current “silo-based” foundation, and expand out to include multiple provider types and settings including, but not limited to:

  • Episodes that occur in a single setting (e.g., ambulatory) and address a single type of providers (e.g. physicians);
  • Episodes  that include both hospital and physician services; and
  • Episodes that include the continuum of Medicare provider services.

Using the episode of care as the unit of analysis, data on the episodes derived from the ETG and MEG grouper tools will be used to calculate descriptive statistics that will provide an array of summary information to better understand trends of care for similarly situated beneficiaries.

The scope of work addressed by this project focused on seven key tasks:

  1. A review of the literature on episode-based approaches to care delivery, as has been applied in the context of provider payment and performance measurement.
  2. A cataloging of existing payments approaches across Medicare provider settings and assessment of the extent to which these payment policies are aligned.
  3. A cataloging of performance measures currently being reported to Medicare by provider setting (ambulatory, hospital, home health, etc.) and an assessment of the extent to which these measures are aligned and where gaps exist.
  4. Discussions with experts to solicit feedback on alternative approaches for defining episodes and creating incentives, both financial and non-financial, that would lead to better alignment of performance measurement and accountability across an episode of care.
  5. Analyses of episodes constructed from two commercially available episode groupers, including descriptions of the number and types of settings an episode touches for various clinical conditions, number and types of other co-occurring episodes, and the amount of care that is delivered outside a beneficiary's primary state of residence.
  6. Modeling of various attribution rules for assigning episodes to one or more providers and examining the impact of the various assignment rules.
  7. Synthesis of the results to assess design considerations and policy issues associated with using an episode-based approach for performance measurement and improving the alignment of financial incentives to providers across settings to enhance coordination, quality and the efficiency with which resources are utilized.

The remaining chapters of this report address an overview of Medicare's payment policies across settings and providers (Chapter 2), a summary of performance measures that are currently supplied to CMS through its' various reporting programs for health care providers and assesses the alignment of these programs (Chapter 3), a review of the literature on the use and potential use of episodes of care for performance measurement and payment and findings from discussions with experts (Chapter 4), a summary of findings from our analysis of the episodes constructed for nine clinical conditions (Chapter 5), and a synthesis of findings and discussion of issues related to application of episodes of care and possible areas for future research and demonstration projects (Chapter 6).

View full report


"report.pdf" (pdf, 1.02Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®