Exploring Episode-Based Approaches for Medicare Performance Measurement, Accountability and Payment Final Report. Proposed Uses and Current Applications of Episodes of Care


We reviewed the empirical literature and held discussions with a small number of experts to identify what types of episodes of care or other groupings of related services have been used, tested, or proposed as a basis for performance measurement and accountability and/or payment.  This review was used to inform our consideration and discussion of issues related to alternative approaches to defining an episode of care. 

Our review finds that episodes of care, defined in a variety of ways, have been used or proposed for use as a unit of payment and as a unit of measurement to assess relative resource use and/or quality performance.  Generally, the episode of care definitions that have been applied or tested tend to be narrow in scope—such as focusing on a single setting of care as is the case with DRG payments for an inpatient stay.  An exception to this is the application of commercial episode grouper software tools that examine resource utilization across multiple settings and providers.  The more recent policy literature discusses broader episode of care constructs for use in performance measurement, joint accountabilities, and payment, but there remains little detailed developmental work or actual testing of these broader episode constructions. 

There is a lack of empirical work regarding how best to construct an episode for the various applications being considered, and what the potential ramifications are of various episode definitions.  While not an exhaustive list, some of the unaddressed questions include: How should an episode of care be defined (how broad vs. how narrow) and would the definition vary depending on the particular application and/or type of condition?  Which providers would be held accountable for an episode and how would these accountable groupings of providers be configured in a disconnected FFS environment?  What types of case mix issues arise within episode of care applications, and how should differences in case mix be handled?  What types of unintended consequences might occur and under which applications—such as skimping on care provided during an episode (which is reminiscent of concerns with capitation payment arrangements), the potential for gaming to maximize reimbursement (e.g. upcoding diagnoses to place patient in an episode with better reimbursement, reminiscent of concerns with certain DRGs or modifying coding or service delivery practices to increase the number of episodes assigned to a patient)—and what types of control mechanisms need to be put in place to minimize the likelihood of unintended consequences occurring?  How should financial incentives or bundled payments be allocated among various providers delivering services during an episode? 

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