Risk Adjusted Data

South Carolina Association of Health Care Quality

What is Risk Adjustment

• Can Risk be Managed?

– Going beyond your best guess

Some Examples of Risk Management • Project Management • Any Insurance • Public Relations • Investing – The

event

causing the risk. – The

likelihood

of the event happening. – The

impact

on the plan if the event occurs

Why Medicine?

Doctor – You have higher X when compared to Y • My patient’s are more complex and sicker • Question is this really true – Enter Risk Adjusted Data • Used to compare one provider to another

Process of Risk Adjustment

• Must have an adequate risk assessment tool.

• Must segment populations in meaningful ways.

• Develop a system to normalize the population.

• Reward or dissuade risky behavior.

Criteria for assessing Risk Adjustment tools

Mechanism of Risk Adjustment

Going National

The Basic Tool DRG -> Risk Adjusted DRG

Hx of DRG

• Developed in 1967 – Introduction of Medicare • Hospitals required to implement Utilization Review • Also implement Quality Assurance Programs • Intentions – Inclusion of all hospital services – Incorporate thousands of diagnoses and procedures – Account for multiple diseases and treatment of individual patients – Differentiate between high and low cost care – Create clinically meaningful catagories • Followed ICD-9 Methodology – Developed 23 Major Diagnostic Categories – Identified patient clusters based on secondary dx, procedures, sex age, discharge status, complications comorbidities to sort out similar LOS and resource consumption

Advent of HCFA-DRG

• Original DRG system flawed – Found to be highly variable – Did not capture severity of illness – Relative weights based on unreliable data – Too slow to keep pace with rapid change • HCFA adopted DRG system as payment for hospitals in 1983 – Took ownership of ensuring annual updates – Reimbursement for hospitalization based on the reason for hospital stay.

– Split out procedure codes to be maintained separately

Refined DRG

• Soon became evident the presence or absence of complications and comorbities (CC) resulted in assignment of different DRG for certain patients – Defined a CC as a secondary diagnosis that specifically increases hospital resource use.

– System modified to account for four levels of CC • Non, Moderate, Major, Catastrophic – Ran pilot studies, but never adopted this modification • Only utilized one CC to modify DRG to Highest level

All Patients DRG

• Adopted by New York State as the payment system for all non-Medicare patients in 1987 – Found DRG system was inadequate to classify resource consumption for: • Neonates • HIV infected patients – NY state contracted 3M to modify DRG system • Added Pediatric modified DRGs • MDC 24 for HIV infection • CC List modified gave rise to MDC 25 – Transplants – Long term vents – Cystic Fibrosis – Nutritional Disorders – High risk OB – Acute Leukemia – Sickle Cell Anemia

All Patient Refined DRG

• Widely used in US, Europe, parts of Asia • Uses Base of AP-DRG system • Developed by 3M in 1990 • Added four subgroups attempting to describe Severity of Illness • Resulted in significant change to group logic – All age and CC distinctions are removed – Replaced by two groups • Severity of illness 1-4 • Risk of Mortality 1-4 • Subgroup assignment is based on the interaction between: – Secondary diagnosis – Age – Principle diagnosis – Presence of certain non-operative procedures

Intent of APR-DRG

From 3M • Compare hospitals across wide range of resources and outcome measures • Evaluate the differences in inpatient mortality rate • Implement and support critical pathways • Identify continuous quality improvement projects • Form the basis of internal management and planning

APR DRG Classification Data Elements MDC Major Diagnostic Category APR DRG Assignment Four Severity of Illness Subclasses 1. Minor 2.

3.

4.

Moderate Major Extreme Four Risk of Mortality Subclasses 1. Minor 2.

3.

4.

Moderate Major Extreme

Does Severity Adjustment really make a difference

Mortality in Severity of Illness -- SRHS 120 100 40 20 80 60 0 Minor SI Moderate SI Severe SI Extreme SI

Mortality in Mortality Risk -- SRHS 120 100 80 60 40 20 0 Minor MR Moderate MR Severe MR Extreme MR

45 40 35 15 10 5 0 30 25 20 LOS in Severity Adjusted-- SRHS Minor SI Moderate SI Major SI Extreme SI

15 10 5 0 45 40 35 30 25 20

LOS in Mortality Risk -- SRHS

Minor MR Moderate MR Major MR Extreme MR

30 20 10 0 80 70 60 50 40 Minor SI

Pattern in Most Hospitals

Moderate SI Major SI Extreme SI

2500 SRHS Severity of Illness – All Patients 2000 1500 1000 500 0 Minor SI Moderate SI Major SI Extreme SI

SRHS Mortality Risk – All Patients 1500 1000 500 0 3500 3000 2500 2000 Minor MR Moderate MR Major MR Extreme MR

Big Deal, What can I do with this Knowledge

40 35 15 10 5 0 30 25 20 45

Case Management Perspective

Minor SI Moderate SI Major SI Extreme SI

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Minor SI

Discharge Planning

Moderate SI Major SI Extreme SI Home DC Home Health SNF

Disposition is not an Issue

60 50 40 30 20 10 0 HOME DISCHARGE HOME HEALTH AGENCY/HOSP ICE SNF-SKILLED NURSING FACILITY Other

14 12 10 8 6 4 2 0 NICU Babies Pre term PSYCH

Age

Oncology with Surgery PSYCH & GI Procedure S1

70 60 50 40 30 20 10

56% of Outliers in 4 Units

100% 100% 90% 17% 32% 45% 56% 30% 20% 10% 0% 80% 70% 60% 50% 40% 0 PSYCH-3 SOUTH-EAST 4 TOWER NURSERY INTERMEDIATE 8 TOWER Other

6 3 2 5 4 1 0 4 2 0 8 6 12 10 CURRAN,COLIN SHAH,AMISHI

But I Admit more then others

100% 100% 90 99% 100% 90% 92% 80 85% 80% 82% 70 70% 69% 60 60% 54% 50 58% 50% 100% 90% 80% 70% 60% 50% 40 40% 40% 29% 30% 30 30% 20 20% 20% 10 10% 10% 0 0% GRAVELY,VONDA MEMON,MOHAMMED A

Attending Physician

CASTON,CHRIS POWELL,W S 0% SHAH,AMISHI GRAVELY,VONDA MEMON,MOHAMMED A

Attending Physician

CASTON,CHRIS POWELL,W S 100% 100% 100 100% 100% 90% 90% 86% 83% 80% 80% 80 67% 70% 71% 70% 60% 60% 60 54% 50% 50% 40% 40% 40 37% 21% 30% 30% 20% 20% 20 10% 10% 0 0% 0% NELSON,ERIC CHARLES BEARDEN,JAMES D CURRAN,COLIN PATI,ASIM R

Attending Physician

CORSO,STEVEN W Other BEARDEN,JAMES D

Attending Physician

NELSON,ERIC CHARLES

Patient Mix

100% 80% 60% 40% 20% 0% CHERRY,STEPHEN R EICKMAN,F MICHAEL GALLAGHER,JOHN HUEY,BARRY L IKE,DAVID LITTLEFIELD,RONALD H LOPEZ,ALEJANDRO N MACDONALD,ROBERT G MOBLEY,JOSEPH RODAK,DAVID J SRIVASTAVA,NALIN K STORY,JAMES R

Costs

30000 25000 20000 15000 10000 5000 0 CHERRY,STEPHEN R EICKMAN,F MICHAEL GALLAGHER,JOHN HUEY,BARRY L IKE,DAVID LITTLEFIELD,RONALD H LOPEZ,ALEJANDRO N MACDONALD,ROBERT G MOBLEY,JOSEPH RODAK,DAVID J SRIVASTAVA,NALIN K STORY,JAMES R Extreme SI Major SI Moderate SI Minor SI

30000

DRG Specific Cost Comparison

25000 20000 15000 10000 5000 0 CHERRY,STEPHEN R EICKMAN,F MICHAEL GALLAGHER,JOHN HUEY,BARRY L IKE,DAVID Extreme SI Major SI Moderate SI Minor SI MOBLEY,JOSEPH RODAK,DAVID J SRIVASTAVA,NALIN K STORY,JAMES R

Compare Your Processes

25000 20000 15000 10000 5000 0 Minor SI Moderate SI Major SI Extreme SI

10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% Minor SI

Refine the Search

Moderate SI Major SI 117 125 132 552 Extreme SI

Get to the Details

• DRG 117 Revision of Pacer (Few Patients) – 2 docs in SI Moderate • 1. avg cost $3,500 • 2 avg cost $12,300 – Higher utilization of resources Xrays, Labs LOS 5 days vs 3 • DRG 125 Heart Dz w/o MI & wCath – 7 docs in Group 3 • Avg Cost $4500 • 1 pt with cost $15,000 complication of Malignant Htn • DRG 132 Atherosclerosis with CC – Group 3 - 1 pt expired with long LOS and MR 4 – Group 2 – One physician Avg cost $12,500 vs, $3,000 • Medication profile • DRG 552 pacer w/o other major CV dx.

– Group 2 two main physicians one uses more expensive device – Group 3 1 pt longer LOS

Really Why should I care CMS Is Changing the Rules

Refinement of the Relative Weight Calculation • Pattern of increasing Medical weights and lowering Surgical weights remains • Transition period mitigates swings in payment • Process: 1. Standardized charges were broken into 13 cost buckets 2. National Cost-to-Charge Ratio was used to convert charges into costs 3. Standard methodology to create the weights was used • Hospital Specific Relative Value (HSRV) methodology will NOT be used in FY 2007 • Independent contractor will evaluate charge compression with HSRV

Refinement of the Relative Weight Calculation Implementation of a cost-based weight methodology over a 3 year transition period • Year 1 – Weights based on a blend of: – 33% cost based weights – 67% charge based weights • Year 2 – Weights based on a blend of: – 67% cost based weights – 33% charge based weights • Year 3 – Weights based on 100% costs

Do Severity and Risk Adjustment Make a Difference?

Application of Final Rule

DRG 148 (Major small and large bowel procedures w/cc) – CMS medical advisors felt the presence of major gastrointestinal diagnoses identifies patients with a higher level of severity.

30 20 10 0 80 70 60 50 40 Minor SI

Pattern in Most Hospitals

Moderate SI Major SI Extreme SI

Follow the Money

Severity Adjusted DRGs – On Hold

What Questions Does your Organization Need to ask

Present on Admission

• Deficit Reduction Act of 2005 (DEFRA) – Requires Present on Admission (POA) indicators to be collected for all Medicare patients beginning this Oct.

– Requires CMS to select 2 or more infectious that are high cost/High volume to focus on.

– Require CMS to begin excluding those infections when the are identified as not present on admission from the calculation of the DRG beginning Oct 1 2008

Case Example

Principle Diagnosis Secondary Diagnosis Procedures Medicare DRG Medicare Weight No Complication Atrial Fibrillation Temp Pacemaker Cardiac Arrhythmia W/O CC Current Payment with Complication Atrial Fibrillation Pneumonia Temp Pacemaker Mechanical Ventilator Cardiac Arrhythmia W/O CC Simulated Payment Hosp Acquied Infection Atrial Fibrillation (POA) Pneumonia (Not POA) Temp Pacemaker Mechanical Ventilator Cardiac Arrhythmia W/O CC 0.5227

0.8287

0.5227

Reimbursement $3,839 $6,086 $3,839

Risk Adjustment for Quality Indicators • Agency for Healthcare research and Quality released comprehensive set of quality indicators intended to flag potential quality problems.

• UCSF - Stanford Evidence based Practice center developed these indicators using APR-DRGs as the basis for risk adjustment

Preparing for Report Cards

Hospitals must: • • Be proactive in evaluating data – – – Prevent surprises: Anticipate your performance ratings Prepare well-planned responses to negative ratings Develop improvement programs to correct any identified problem areas Invest in the quality of medical records, documentation, and information systems – Severity-of-illness and risk-of-mortality adjustments require a thorough reporting of patients’ diagnoses – Incomplete coding can negatively affect the evaluation of the institution on the report cards

Step One

Public Reporting of Data

Change Pattern -- Volumes

3000 2500 2000 1500 1000 500 0 Minor SI Moderate SI Major SI Extreme SI 2005 2006

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0 0.4

Yes Education Is a Good thing Change in percent of total

2005 2006 Minor SI Moderate SI Major SI Extreme SI

Change Mortality Pattern

0.6

0.5

0.1

0 0.4

0.3

0.2

Minor MR Moderate MR Major MR Extreme MR 2005 2006

Total vs. Ratio (Act/Exp)

30 20 50 40 80 70 60 10 0 O ct 2 003 Dec 2 00 3 Feb 2 004 A pr 2 004 Jun 2 00 4 A ug 20 04 O ct 2 004 Dec 2 00 4 Feb 2 005 A pr 2 005 Jun 2 00 5 A ug 20 05 O ct 2 005 Dec 2 00 5 Feb 2 006 A pr 2 006 Jun 2 00 6 A ug 20 06 O ct 2 006 Dec 2 00 6 Medicare Mortality Risk Adj Medicare Mortality

1.6

1.5

1.4

1.3

1.2

1.9

1.8

1.7

Ratio of actual to expected

1.1

1 0.9

O ct 2 003 Dec 2 00 3 Feb 2 004 A pr 2 004 Jun 2 00 4 A ug 20 04 O ct 2 004 Dec 2 00 4 Feb 2 005 A pr 2 005 Jun 2 00 5 A ug 20 05 O ct 2 005 Dec 2 00 5 Feb 2 006 A pr 2 006 Jun 2 00 6 A ug 20 06 O ct 2 006 Dec 2 00 6

6.2

6.4

Risk Adjustment Length of Stay

6 5.8

5.6

5.4

5.2

5 Jan-Mar 2004 Apr-Jun 2004 Jul-Sep 2004 Oct-Dec 2004 Jan-Mar 2005 Apr-Jun 2005 Jul-Sep 2005 Oct-Dec 2005 Jan-Mar 2006 Apr-Jun 2006 Jul-Sep 2006 Oct-Dec 2006

Remember Newton’s Third Law

"For every action, there is an equal and opposite reaction."

2.5

2 3.5

3

Coded Complications

Nervous System Complications 4.5

1.5

1 0.5

0 Jan-Mar 2004 Apr-Jun 2004 Jul-Sep 2004 Oct-Dec 2004 Jan-Mar 2005 Apr-Jun 2005 Jul-Sep 2005 Oct-Dec 2005 Jan-Mar 2006 Apr-Jun 2006 Jul-Sep 2006 Oct-Dec 2006 s 4 3.5

3 2.5

2 1.5

Peripheral Vascular Complications 1 0.5

0 Jan-Mar 2004 Apr-Jun 2004 Jul-Sep 2004 Oct-Dec 2004 Jan-Mar 2005 Apr-Jun 2005 Jul-Sep 2005 Oct-Dec 2005 Jan-Mar 2006 Apr-Jun 2006 Jul-Sep 2006 Oct-Dec 2006 4.4

s 14 12 10 4 2 8 6 Cardiac Complication 4.1

s 0 Jan-Mar 2004 Apr-Jun 2004 Jul-Sep 2004 Oct-Dec 2004 Jan-Mar 2005 Apr-Jun 2005 Jul-Sep 2005 Oct-Dec 2005 Jan-Mar 2006 Apr-Jun 2006 Jul-Sep 2006 Oct-Dec 2006 10 9 8 7 6 4.0

s Respiratory Complications 3 2 5 4 1 0 Jan-Mar 2004 Apr-Jun 2004 Jul-Sep 2004 Oct-Dec 2004 Jan-Mar 2005 Apr-Jun 2005 Jul-Sep 2005 Oct-Dec 2005 Jan-Mar 2006 Apr-Jun 2006 Jul-Sep 2006 Oct-Dec 2006

What Have We Learned

• My kids would say nothing.