reports

A comparison of alternative approaches to risk measurement

Final report, grant number 93-G07, Physician Payment Review Commission. Minneapolis, MN, USA: Park Nicollet Medical Foundation.

Park Nicollet Medical Foundation, Minneapolis, MN, USA

Under health care reform based on community rating and competing private health plans, methods will be needed to adjust premium or capitation rates in order to adequately compensate for differences in the relative risk of consumers enrolled in participating provider networks. Without an adequate risk adjustment process, health plans or risk-bearing providers within these plans would have a financial incentive to select healthier enrollees. Similarly, under a regulatory pricing system in which capitation payment rates are set by either state or federal government, risk adjusters would be needed to account for relative risk across plans.
The primary purpose of this study was to evaluate several alternative methods of risk assessment within a single population. Risk assessment measures, that is the metrics used to distinguish individuals who are more or less likely than average to need health care services, are central to any risk adjustment process. The risk assessment measures evaluated here included demographics, self-reported health status, behavioral risk factors and chronic diseases, and clinician-assigned patient morbidity information derived from claims and encounter data. Our objective was to compare and contrast the relative strength of these measures for predicting future resource use. The study also included an analysis of administrative feasibility issues associated with the application of each risk assessment method. With input from a national panel of industry and government experts, we evaluated the ease of administration, the start-up and ongoing costs of data collection, acceptability of the measures, resistance to bias and gaming, amenability to business cycles, and issues related to privacy and confidentiality.