Diagnosis-related payment system could boost managed care for disabled population
Disabled Managed Care
Questions about how best to reimburse health plans for people with disabilities have been a major obstacle for states seeking to enroll their disabled populations into managed care.
The Boston-based Medicaid Working Group believes a diagnosis-related payment system it has developed goes a long way toward addressing the risk-adjustment issues that have made people with disabilities unlikely candidates for managed care, according to Tony Dreyfus of the Medicaid Working Group.
Based on data from almost 400,000 Medicaid recipients from Colorado, Ohio, Missouri, New York and Michigan, the Disability Payment System (DPS) uses 18 major diagnostic areas and 39 subgroups to set capitation rates.
At least two states are seriously considering testing DPS. Missouri may use the system in a pilot project with the University of Missouri Health Sciences Center, and Colorado is collecting diagnostic information from health plans to start a pilot project next year. The Medicaid Working Group, which is affiliated with the Boston University School of Public Health, believes several other states may ultimately test the model, including New Jersey, Maryland and Ohio.
Diagnoses in the DPS were selected based on the degree to which they are associated "with elevated future costs." Some common diagnoses such as hypertension and obesity have been left out because they are not associated with rising costs.
An important feature of the system is that payments are made for multiple
diagnoses. According to Medicaid Working Group research, average expenditures are higher for people with multiple diagnoses.
"I think everyone would benefit from having a health care system that strives to better meet the needs of people with disabilities rather than figure out how to avoid those people," says Mr. Dreyfus.
Without adequate risk adjustment, insurers simply will try to enroll the least costly people possible, Mr. Dreyfus says. That’s relatively easy to do with the disabled, either through brief conversations or claims records.
As in the general population, it is a minority of the disabled population that accounts for the majority of health costs for the disabled. Among Colorado Medicaid recipients with disabilities, for instance, 10% of the population accounted for 63% of expenditures in 1994, according to Working Group research.
Data-keeping burdens increase
For the system to work, states need to "clean their claims data" so summaries of diagnoses and expenditures for each individual are readily available for initial risk adjusting, Mr. Dreyfus says. Health plans also would need to collect and report diagnostic data so that capitation rates could be further refined over time.
"A number of health plans have complained that would be a burden for them," he says. "But we feel it’s important for state Medicaid programs to insist that if they’re paying health plans to manage care of Medicaid recipients that they should certainly be able to come up with basic information, such as what the chronic diagnoses are. We’re starting to hear that diagnostic systems being developed by health plans are becoming more sophisticated and they’ll increasingly be able to do that."
In Missouri, Kristofer Hagglund, a psychologist and associate professor in the Department of Physical Medicine and Rehabilitation at the University of Missouri’s Rusk Rehabilitation Center, says he’s "90% sure" a pilot Medicaid managed care program he’s helping to develop will use DPS.
"Our feeling is that it may initially be more cumbersome than traditional reimbursement models for the state and other agencies," Mr. Hagglund says. "But in my mind, it really holds potential to develop a fair and appropriate reimbursement
system."
Children’s issue
One area that even the Medicaid Working Group acknowledges needs fine-tuning is capitation rates for children.
Children’s rapid development, and hence rapidly changing medical condition, may make diagnostic categories less useful for them, says Lindsey Grossman, M.D., chief of ambulatory pediatrics at Columbus Children’s Hospital and associate professor at Ohio State University. The hospital treats children with chronic illnesses through an Ohio pilot Medicaid managed care program for the disabled.
"We’re seeing that there may be more similarity in cost for a child with a mild case of sickle cell anemia and another with a mild case of cerebral palsy than between a kid with mild sickle cell anemia and one with severe sickle cell anemia," says Dr. Grossman.
Other pediatric studies also have found more similarities in costs based on severity of illness than on diagnosis, says Dr. Grossman. She notes that diagnostic data is easier to find and categorize than severity data.
The Working Group acknowledges that DPS may need to be modified to work with children and is seeking a grant from the Robert Wood Johnson Foundation’s Health Care Financing Organization initiative to support further research into this area, Mr. Dreyfus says.
"My personal opinion is that (the Working Group) is barking up the wrong tree," says Dr. Grossman who doesn’t believe diagnostic risk adjustments will work well for anyone.
She says she favors the system being used in Ohio’s pilot managed care program for the disabled. The Medicaid Working Group has been working with several states, including Wisconsin, Ohio and Missouri, to develop managed care programs for the disabled population. Ohio pays plans a range of capitation rates depending on the category of historical spending the patient fits into. The spending categories range from under $1,000 to more than $15,000 annually.
One major weakness of a system using historical costs is that it is difficult to establish reimbursement for new enrollees, says Katherine Gharrity, health services policy director of the Ohio Department of Human Services. Currently, when there are new enrollees, the state pays an average rate and adjusts for actual utilization patterns.
No incentive for overutilization
This is not an issue with a diagnosis-based system. Other advantages of a diagnostic approach is that it discourages overutilization of services, and it also changes the focus of patient care from medical procedures to health status.
Ohio had considered risk-adjusting based on a diagnostic system but ran into difficulties over the question of how to reimburse for patients with multiple diagnoses, Ms. Gharrity says.
"Some earlier efforts at using diagnosis to predict cost tended to look at the most severe diagnosis," Mr. Dreyfus says. "What we and others have found is that you need to consider both the severity (of the diagnosis) and the number of different kinds of diagnoses."
As with Medicare DRGs, the DPS creates incentives for "overdiagnosis." Mr. Hagglund expects to see more diagnoses under DPS, even without any gaming of the system.
"Often physicians don't make all the diagnoses possible with a patient," he says. "They make one or two, depending on the presenting problem at the time."
Mr. Dreyfus of the Medicaid Working Group argues that an increase in diagnoses isn't as harmful as unnecessary procedures which fee-for-service and even historical spending tends to encourage. If utilization is controlled, capitation rates could decline in the future. Diagnoses also can be audited through quality control elements of plans, Mr. Dreyfus says. "You can send out other clinicians to get second opinions. Physicians are putting their authority on the line when they say they observe a condition in someone. They'd better really believe it."
Contact Mr. Dreyfus at 617-437-1550; Dr. Grossman at 614-722-2000; Ms. Gharrity at 614-466-6650; and Mr. Hagglund at 573-882-6271.
This article was written by Contributing Editor Jack Neff.
Diagnosis-related payment system could boost managed care for disabled population
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