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


Substantial deficits in the quality of health care and persistent and unsustainable growth in health care spending have led to calls for reform of the Medicare system, including such

steps as increasing performance accountability and making changes in payment policies (IOM, 2001; IOM 2006).  Existing Medicare fee-for-service (FFS) performance measurement and payment policies focus on individual provider silos (e.g., provider types and settings of care).  The separate performance measurement and payment systems for each provider type and setting are not aligned around or reflective of the continuum of care that a beneficiary receives within a given course of treatment or episode of care.  Aligning performance measurement and financial incentives for service delivery around a beneficiary’s episode of care is one reform mechanism being considered in an effort to improve care delivery and coordination for the beneficiary and, in turn, to drive improvements in quality and the use of resources.

The Assistant Secretary for Planning and Evaluation (ASPE) contracted with RAND to explore how episodes of care could be defined for a limited set of clinical events/conditions and, based on varying definitions, to consider ways in which the alignment of performance measurement, accountability and incentives to providers could be improved within the current Medicare payment and performance measurement systems in the near term.  RAND was also tasked to provide ASPE with options to consider in moving toward broader episode-based performance measurement and payment reforms to encourage high quality, efficient and coordinated care.  A core piece of the work involved using two commercially available episode grouping software tools to construct episodes; the constructed episodes were then used to illustrate a variety of issues that would need to be considered in applying episodes as a basis for payment and/or performance measurement.

The project used a “building block” framework to examine the construction and application of episodes of care for similarly situated beneficiaries under Medicare FFS.  For the purposes of this project, we define an episode of care as a series of health care services related to the treatment of a specific illness or injury.  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.  The work included a review of the literature, discussions with experts, cataloging existing performance measurement and payment approaches used by Medicare, analyses of episodes constructed for nine clinical conditions for beneficiaries living in three states, a synthesis of findings and recommendations for future work.  A panel of technical experts also provided comments on our analyses of episodes, and reviewed and commented on the final project report.

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®