Exploring Episode-Based Approaches for Medicare Performance Measurement, Accountability and Payment Final Report. Risk Adjustment of Episodes of Care for Payment and Performance Measurement


Most proposals in the literature acknowledge the need to risk-adjust (i.e., adojust for differences in patient populations across providers) episodes of cre for payment and some en a provider represents only a small fraction of all the care delivered and/or does not view her/himtypes of performance measurement, particularly for outcome measures.  Hwever, little detail on the spaecific risk-adjusters that should be used is provided.  Most of the experts also believed that risk adjustment is very important to episode-based approaches—whether the application is for payment or performance measurement.  They felt that risk adjustment was necessary to prevent risk selection by providers and/or insurers.

The risk adjustment literature indicates the results of risk-adjustment are sensitive to the specific patient characteristics included and data sources used (Stuckenborg et al., 2007; Shahian et al., 2007). Some articles stated that when the focus is on cost/resource use, it is appropriate to use adjusters that explain variation in the time and costs of services provided (Goroll et al., 2007; Network for Regional Healthcare Improvement, 2007) , while in the context of performance measurement for intermediate and long-term outcomes of care, adjusters should focus on differences in the severity of illness.  This suggests that two separate sets of risk adjustment may be required if jointly assessing episode-based clinical quality and resource use. 

While there is general agreement about the use of risk-adjustment for payment and outcome measures, there is less of a consensus around its use for process of care measures. Some have argued that some process and intermediate outcome measures are influenced by disease severity as well as patient behavior, such as nonadherence, and that social, cultural, and economic factors influence decisions to seek care and to comply with recommended actions.  Absent a method to address differences in the mix of patients treated across providers, this could create incentives for providers to avoid such patients ( Institute of Medicine Committee on Redesigning Health Insurance Performance Measures, 2007).  However, the issue of risk adjustment needs to be carefully balanced against reducing incentives to providers to reduce health care disparities, which could occur if the risk model adjusts out the undesired variation (differences in care that could be influenced by provider behavior).  The IOM identified risk adjustment and its appropriate use as an area requiring additional research in its report Rewarding Provider Performance (Institute of Medicine Committee on Redesigning Health Insurance Performance Measures, 2007).  In our discussions, many of the experts emphasized the difficulty of risk adjustment for care provided over the course of an episode of care, often in multiple settings. For this reason, other methods for minimizing risk, such as special treatment of outliers, were identified as necessary by several experts.

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