reports

Use predictive modeling to improve profitability under cap

National Health Information LLC. Capitation Rates and Data 9:61-65.

National Health Information LLC, Atlanta, GA, USA

Health plans and capitated provider organizations live or die by actuarial analysis. Historically, actuaries have relied on simple demographic data, such as age and gender, to conduct an experience rating: examine the costs of a member population, predict which members will have the highest future medical costs, and establish sufficient premium or capitation rates.
Plans and providers, alike, still are getting their arms around more sophisticated forms of predictive modeling (PM) that incorporate diagnosis codes, pharmacy data, and other clinical information into the mix. Incorporating the diagnosis codes assigned by physicians and other providers in a given year in order to case-mix and risk adjust rates for the following year improves the ability to predict future health caer costs and establish actuarially sufficient cap rates, experts agree. As morepayers, including Medicare, move to incorporate PM into their rate-setting process, health-based risk adjustment also is becoming a standard component of actuarial analysis.
Even the most sophisticated PM systems are not perfect, however, so it’s important for capitated providers to understand exactly what PM does and does not accomplish.