Academic journal article Health Care Financing Review

CMS Frailty Adjustment Model

Academic journal article Health Care Financing Review

CMS Frailty Adjustment Model

Article excerpt

INTRODUCTION

In response to the Balanced Budget Act of 1997 (BBA) requirement for health-based risk adjustment of Medicare capitation payment to health plans, in 2000 CMS implemented the Principal Inpatient Diagnostic Cost Group (PIP-DCG) model (Pope et al., 2000a). However, the PIP-DCG model was limited by its exclusive reliance on inpatient diagnoses. To fulfill the Benefits Improvement and Protection Act of 2000 (BIPA) mandate for the use of ambulatory diagnoses in risk adjustment by 2004, CMS implemented the CMS-hierarchical condition categories (HCC) model (Pope et al., 2004a). Although the PIP-DCG and CMS-HCC methodologies are important milestones, further improvements to risk adjustment are necessary for certain Medicare subpopulations. Several analyses (Pope et al., 1998, 1999, and 2003; Gruenberg et al., 1999; Riley, 2000; Kautter and Pope, 2001; Hogan, 2001) have shown that current diagnosis-based risk adjusters do not fully predict the expenditures of the frail elderly, where frailty is generally defined in terms of functional impairments.

Accurate prediction for the frail elderly is a particularly important issue for MCOs whose models of care focus disproportionately on the frail elderly, such as PACE. The BBA mandated that Medicare capitated payments to PACE MCOs be adjusted to account for the comparative frailty of PACE enrollees. A payment factor to account for higher expenditures of the frail elderly helps ensure the viability of these frailty MCOs, and thus access for beneficiaries to the care they provide.

This article describes the development of a Medicare payment approach that adjusts payments to an MCO according to the functional impairment of its enrollees. Beginning in 2004, this approach is being applied to PACE, and to the social health maintenance organization (S/HMO), Wisconsin Partnership Program (WPP), Minnesota Senior Health Options (MSHO), and Minnesota Disability Health Options (MnDHO) demonstrations. In the future, frailty adjustment could be applied to more MCOs.

POTENTIAL FRAILTY ADJUSTERS

Fried and Walston (1999) provide a clinical description of frailty. Frailty represents a state of age-related physiologic vulnerability resulting from impaired reserve and a reduced capacity to respond effectively to stressors. The manifestations of frailty are a constellation of symptoms including weight loss, weakness, fatigue, inactivity, and decreased food intake. In addition, signs of frailty frequently are cited as components of the syndrome; these include decreased muscle mass, balance and gait abnormalities, deconditioning, and decreased bone mass. These clinical characteristics have been shown to be highly predictive of a range of adverse outcomes clinically associated with frailty, including decline in function, institutionalization, and mortality. In terms of disability, measures that have been used as indicators of frailty include chronic limitations or dependency in mobility, as well as activities of daily living (ADLs) or instrumental activities of daily living (IADLs). Disability is also a predictor of future risk. It is associated with increased use of physician services, hospitalizations, and mortality.

Drawing partly on this clinical description of frailty, potential frailty adjusters may be categorized as follows: (1) demographic/enrollment characteristics; (2) diagnoses; (3) service utilization; (4) functional status; (5) other self-reported or assessment health status measures; and 6) mortality rate.

Demographic/Enrollment Factors

These characteristics include age, sex, aged versus disabled eligibility status (including originally disabled status (1)), Medicaid dual enrollment, and institutional status. All of these variables are utilized in the CMS-HCC risk adjuster. Hence, these variables are not expected to be useful in explaining cost variation not captured by the CMS-HCC risk adjuster (i.e., residual expenditures). …

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