Hierarchical condition category and Centers for Medicare & Medicaid Services model - Research Paper Example

This research paper will mainly focus on the Hierarchical condition category and Centers for Medicare & Medicaid Services model. It will go ahead and give its principles, organization of the model and the segments used in this model. In the paper, there is a diagram to show the versions of this model. The paper continues to give the subpopulations in the Hierarchical condition category and Centers for Medicare & Medicaid Services model and their adjustments. Hierarchical condition category and Centers for Medicare & Medicaid Services One of the methods used in amending health plans capitation payments is risk amendment. This can be either lower or higher to explain the differences in the health costs expected for individuals. Insurers in establishing their revenue necessities are using various factors and medical expenditure trends. The models of adjusting risks used, determine the monthly capitation fee for every enrollee. The expectations of these models are supposed to be accurate (Special Needs Plan Chronic Condition Panel Final Report, 2008). Principles for Hierarchical condition category and Centers for Medicare & Medicaid Services The model for Hierarchical condition category uses mainly demographic information such as sex and age. On the other hand, it uses medical condition profiles in order to calculate the following year’s expenditures in Medicare. It is standardized on the fee for service population because it gives full and complete data on Medicare claims unlike the Medicare advantage population. While developing this model, establishing diagnosis codes are to be taken account of; their grouping and how these groupings work together for the purposes of risk adjustments was a vital step. The first principle states that groups of diagnostics are supposed to be meaningful in a clinical manner. Every diagnostic group is part of the International Classification of Diseases, Ninth Revision, Clinical Modification codes. The codes issued are supposed to relate with a medical condition or a specified disease that identifies the category (Nonnemaker, 2009). The conditions issued are supposed to be adequately specified in a clinical way in order to diminish the discretionary coding or gaming opportunities. The face authority of the system of classification to the clinicians is improved by the clinical meaningfulness. On the other hand, the clinical meaningfulness improves superiority, monitoring disease organization utility and interpretability. The second principle is the prediction of the medical expenditures by the diagnostic groups. The diagnoses in the similar Hierarchical condition category are supposed to be homogenous with effects respect on the future and current year’s costs. The third principle is the diagnostic groups, those that are assumed to have an effect on payments are supposed to be adequate in their illustration size for correct expenditure estimates. These diagnostics used in payment establishment are supposed to have sufficient illustration sizes in the data sets accessible. The fourth principle is the use of hierarchies in creating a clinical profile of a person (American Academy of Actuaries, 2010). This is to distinguish the level of illness of a given person while the disease effects are accumulating. These disease effects are expected to increase the medical care costs because every medical issue adds up to a disease trouble of an individual. Disease conditions that are related in one way or the other are supposed to be hierarchically treated. The fifth principle is the encouragement of diagnostic categorization in encouraging detailed coding. Diagnostic codes that are assumed indistinct, are supposed to be classified with less severe categories of diagnostics in order to give incentives for a diagnostic coding that is specific. The sixth principle is the classification of diagnostics that are not supposed to be issued with any coding creation rewards. It is not supposed to determine an immense burden of a given disease because of the presence of the International Classification of Diseases, Ninth Revision, Clinical Modification codes. The costs predicted are not supposed to be increased by the times a given code appears (American Academy of Actuaries, 2006). The seventh principle is that no provider is supposed to be penalized for extra diagnoses records. There are two modeling consequences in this principle. The first one is that no condition group is supposed to have a negative weight on payment while the second consequence is that a high ranked disease condition in a hierarchy is supposed to have a minimum weight payment. The eighth principle is that the system used in classification is supposed to be consistent internally. The internal consistency of this classification is improved by the transitivity. The ninth principle is that diagnostic classifications are supposed to allocate all codes of International Classification of Diseases, Ninth Revision, and Clinical Modification. The fact that appropriate clinical information is in every diagnostic code, the International Classification of Diseases, Ninth Revision, Clinical Modification codes are categorized by the classifications (Nonnemaker, 2009). The tenth principle is the exclusion of diagnostic groups from the payment models. Diagnoses that are intentional unrestricted coding disparity are not supposed to increase prediction costs. Eliminating the diagnoses diminishes the models sensitivity to gaming, up coding and variation to coding. In the classification diagnostic design, transitivity, exhaustive classification and monotonicity are followed correctly. An example is a condition whereby the weights expenditure of the models are not satisfying monotonicity originally and restrictions were obliged to development of models that could perform the function required. Pope, Kautter and Ellis (2004) state that in making tradeoffs in the midst of principles, usage of judgment was a necessity. For example, the first principle is served by the creation of an enormous number of clinical groupings that are detailed. The third principle on the other hand has enormous grouping population conflicts that contain sufficient trial sizes for every category. One of the other tradeoffs is supporting given coding according to the fifth principle in opposition to power considered to be predictive in the second principle. In the present practices of coding, codes that are not specific are frequently used. In a case whereby these codes are removed from the system of classification, sacrificing of prognostic power may be required. In addition, the tenth principle shows how the exclusion of these optional codes may lead to a decline in the extrapolative power. The developers of the model moved towards the tradeoffs that were inherent and involved themselves in the classification system design (The SNP Alliance, 2009). This was received by using experiential confirmation on frequencies with the power considered predictive; specificity; diagnoses severity and the responses of a provider to the classification organization. The model of Hierarchical condition category and Centers for Medicare & Medicaid Services stabilizes these contending goals in order to get a health based payment structure that is feasible. Organization of the Hierarchical condition category and Centers for Medicare & Medicaid Services Model The diagnostic system of classification in the hierarchical condition category starts by; organizing more than fourteen thousand International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) diagnosis codes into eight hundred and five diagnostic categories. Every International Classification of Diseases, Ninth Revision, and Clinical Modification forms one diagnostic group that stands for a medical condition considered to be specified. According to the American Academy of Actuaries (1980), the diagnostic groups are additional and are combined into one hundred and eighty nine condition categories. These condition categories give more information on broader set of diseases that are similar. Even though the conditions categories are not the same as the diagnostic groups, the diseases found in the conditions category are clinically related and by cost respect. An example of this disease is the unspecified stroke that has diagnostic groups (DXGs) 96.01 precerebral and 96.02 cerebrovascular diseases that are ill defined. Hierarchical Condition Categories Centers for Medicare & Medicaid Services model version 12 (Riley, Tudor, Chiang and Ingber, 1996). Hierarchies are enforced in condition categories that are related in order for a person to be coded for the main rigorous manifestation in the midst of diseases that are related. A person who has International Classification of Diseases, Ninth Revision, Clinical Modification code in condition category eighty one is ruled out from condition categories codes eighty two, eighty three or eighty four even if the codes present are from the same categories. When the hierarchies are imposed, the condition categories turn out to be hierarchical. Although the hierarchical condition categories reveal hierarchies in categories of diseases that are related, they accumulate in the diseases that are unrelated. An example is; a male who has stroke has three hierarchies condition categories that are stated to be separated and the cost to be predicted reflects the three problems percentage increases. This model on the other hand integrates some interface terms for circumstances whereby additive is less than the cost (Riley, Tudor, Chiang and Ingber, 1996). In addition, there are two-way dealings among the disease categories. Many dealings in diseases are ordeal in development of the model and significant cost effects are reflected in the model. The hierarchies condition categories are allocated using diagnoses from physicians and hospital from either secondary diagnosis from hospital in-patients, non physicians and physicians that are not clinically trained among others. This model does not place any premium on inpatient care diagnoses. On the other hand, the hierarchical condition category and Centers for Medicare & Medicaid Services model relies also on the given demographics such as age sex cells (Pope, Ellis and Ash, 2000). Segments of the Hierarchical Condition Category and Centers for Medicare & Medicaid Services Model A primary goal of adjusting risk, is forecasting expenditures correctly for Medicare subgroups beneficiaries. This is the reason of differentiation between nursing homes versus community residing homes or new enrollees in Medicare and the enrollees continuing in this model. On the other hand, there are various small groups of beneficiaries whereby the model of risk adjustment does not foretell any expenditure for them. These small groups may be people with poor health or the elderly. In such cases, an extra risk adjustment aspect is pertained to the beneficiaries’ payment (Pope, Kautter and Ellis, 2004). Subpopulations Hierarchical Condition Category and Centers for Medicare & Medicaid Services Models Beneficiaries in Medicare hold opposing views along with important characteristics for risk adjustment. Nearly five percent of the beneficiaries in Medicare are residents considered long term in various institutions and nursing facilities. The beneficiaries that are institutionalized are given permission in enrolling, and continue to be enrolled in the Medicare advantage plans. Among the disabled or aged residents, the residents in institutions are eighty-nine percent more expensive than the residents among the communities (Kautter, and Pope, 2005). The reason as to why people in the various institutions cost more is the fact that they have many medical related problems. Even though the beneficiaries in the institutions are termed to be more costly than the residents in the community to the Medicare program, their expenses are over forecasted by the hierarchical condition category and Centers for Medicare & Medicaid Services model. The over forecasting may occur due to non Medicare substitution for reimbursement of Medicare services in nursing homes, keep an eye on patients in order to prevent hospitalization problems and diminishing antagonistic care for old people in these nursing homes. The model is ballpark figured for the institutional, aged and disabled people in the nursing homes. Version twelve of the hierarchical condition category and Centers for Medicare & Medicaid Services model makes use of the seventy-payment hierarchical condition category and terms of interactions the same as the version twelve of the community model (Kautter, Ingber and Pope, 2009). New Enrollees Aged Model The Hierarchical condition category and Centers for Medicare & Medicaid Services model is prospective, usage of diagnoses predict the year and the model needs a comprehensive twelve-month diagnostic report. In order to calibrate the model, beneficiaries who do not have a twelve month base of Medicare enrollment and identified for Medicare advantage purposes of payment as innovative enrollees (Centers for Medicare & Medicaid Services, 2012). The new enrollees include new individuals and beneficiaries in the Medicare program. Many of these enrollees are entitled for Medicare by mainly reaching the age of sixty-five, which is the qualifying age. In case an enrollee wants to be qualified for Medicare by end stage renal disease; he or she is supposed to be under sixty five years. Due to the lack of diagnostic information by the fresh enrollees, Centers for Medicare & Medicaid Services created a model, which predicted the enrollee’s expenditures. The scores of the fresh enrollee are equal for both the institutional and community beneficiaries. On the other hand, this model is used for risk adjustment of the beneficiaries who are disabled and enrolling in Medicare advantage plans whereby the Centers for Medicare & Medicaid Services model is not valid. In addition, the model is used in predicting expenditures (Levy, Robst and Ingber, 2006). This is mainly the Medicaid demographic factor. The status of the Medicaid for the model is determined in the year of payment because the Centers for Medicare & Medicaid Services do not look at the information proceeding to the entitlement of the beneficiaries to Medicare. End Stage Renal Disease Models Everyone who has an End Stage Renal Disease is entitled for Medicare. Even though this population is not widely spread, the beneficiaries have widespread health needs and elevated medical care expenditures that differentiate them from the people who are entitled for Medicare by either age or other status. Different models of risk adjustment are appropriate in the End Stage Renal Disease residents. The beneficiaries of this model may be sorted out into three different categories relating to their treatment status, transfer of body organs and according to the functioning implant. The person’s in the dialysis status are not supposed to join a Medicare advantage plan according to the law issued with the exception of given circumstances like unusual needs specific to the End Stage Renal Diseases. The beneficiaries in the Medicare advantage plan who develop any of the End Stage Renal Disease symptoms are allowed to remain in the Medicare advantage plan. If there is not enough risk adjustment, the plan may be forced to register graft patients that have a low cost function and keep away from the dialysis patients who are termed to be costly (Centers for Disease Control and Prevention, 2010). The Hierarchical Condition Category and Centers for Medicare & Medicaid Services Models Adjustments The Hierarchical condition category and Centers for Medicare & Medicaid Services aged models do not totally forecast payments for the elderly community. As obliged by the law, Centers for Medicare & Medicaid Services has pertained a defenselessness alteration to the enrollees payments in the Program of All-Inclusive Care for the Elderly organizations from 2004 (Mello, Stearns, Norton, and Ricketts, 2003). On the other hand, Centers for Medicare & Medicaid Services has pertained the infirmity adjustment to precise exhibitions that are to end in 2011. In addition, the model is making efforts to create various methodologies in paying definite unique needs arrangements. According to a research conducted by the Centers for Medicare & Medicaid Services, they determined if the frailty adjustment was to be applied in the Medicare advantage plans. The model concluded that pertaining of the adjuster will not advance accuracy in the payments due to the methodological fears (Brown, Clement and Hill, 1993). Conclusion The implementation of the Hierarchical condition category and Centers for Medicare & Medicaid Services models in the payment of the risk adjustment consented to medical costs predictions for the Medicare advantage enrollees. The use of the model is to readdress money from the Medicare advantage plans that unreasonably register the healthy while presenting the plans of the Medicare advantage, which are concerned for the patients who are sick. In addition, the main purposes of the Hierarchical condition category and Centers for Medicare & Medicaid Services models is to enhance reasonable payments to the Medicare advantage plans, which give good payments and promote good care for the persistently ill. One of the main goals of the Centers for Medicare & Medicaid Services models is to look into various ways for improving expenditure forecast by the use of administrative information of expenditures that are average. References Actuarial Standard of Practice No. 12: Risk Classification (for All Practice Areas). Actuarial Standards Board, Doc. No. 101. December 2005. American Academy of Actuaries. Risk Assessment and Risk Adjustment. Issue Brief. Washington DC, May 2010. American Academy of Actuaries. Risk Classification Statement of Principles. Washington DC, 1980. American Academy of Actuaries. Wading Through Medical Insurance Pools: A Primer. Issue Brief. Washington DC, September 2006. Brown, R.S., Clement, D.G., Hill, J.W., et al.: Do Health Maintenance Organizations Work for Medicare? Health Care Financing Review 15(1), Fall 1993. Centers for Disease Control and Prevention (CDC): International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM).2010. Retrieved 9 April, 2012 from . Centers for Medicare & Medicaid Services (CMS). 2012 Advance Notice. Retrieved 9 April, 2012 from . Kautter, J., and Pope, G.C.: CMS Frailty Adjustment Model. Health Care Financing Review 26(2), Winter 2004-2005. Kautter, J., Ingber, M., and Pope, G.C.: Medicare Risk Adjustment for the Frail Elderly. Health Care Financing Review 30(2), Winter 2008-2009. Levy, J.M., Robst, J., and Ingber, M.J.: Risk-Adjustment System for the Medicare Capitated ESRD Program. Health Care Financing Review 27(4), Summer 2006. Mello, M.M., Stearns, S.C., Norton, E.C., and Ricketts, T.C. III: Understanding Biased Selection in Medicare HMOs. Health Services Research 38(3), June 2003. Nonnemaker, L.: Beyond Age Rating: Spreading Risk in Health Insurance Markets. AARP Public Policy Institute, Insight on the Issues 135. Washington DC, October 2009. Pope, G.C., Ellis, R.P., Ash, A.S., et al.: Diagnostic Cost Group Hierarchical Condition Category Models for Medicare Risk Adjustment. Final Report to the Health Care. 2000. Pope, G.C., Ellis, R.P., Ash, A.S., et al.: Principal Inpatient Diagnostic Cost Group Model for Medicare Risk Adjustment. Health Care Financing Review 21(3), Spring 2000. Pope, G.C., Kautter, J., Ellis, R.P., et al.: Risk Adjustment for Medicare Capitation Payments Using the CMS-HCC Model. Health Care Financing Review 25(4), Summer, 2004. Riley, G., Tudor, C., Chiang, Y., and Ingber, M.J.: Health Status of Medicare Enrollees in HMOs and Fee-for-Service in 1994. Health Care Financing Review 17(4), Summer 1996. Special Needs Plan Chronic Condition Panel Final Report. Centers for Medicare & Medicaid Services. November 2008. The SNP Alliance. Strategy for Health Care Reform. A Policy Report from the SNP Alliance. Washington, DC, February 2009. Read More