RISK-ADJUSTED MEDICARE CAPITATION RATES USING AMBULATORY AND INPATIENT DIAGNOSES

Researchers at The Johns Hopkins University (JHU) developed two new di agnosis-oriented methodologies for setting risk-adjusted capitation ra tes for managed care plans contracting with Medicare. These adjusters predict the future medical expenditures of aged Medicare enrollees bas ed on demographic factors and diagnostic information. The models use t he Ambulatory Care Group (ACG) algorithm to categorize ambulatory diag noses. Two alternative approaches for categorizing inpatient diagnoses were used. Lewin-VHI, Inc. evaluated the models using data from 624,0 00 randomly selected aged Medicare beneficiaries. The models predict e xpenditures far better than the Adjusted Average per Capita Cost (AAPC C) Payment method. It is possible that risk-adjusted capitation Paymen ts could encourage health plans to compete on the basis of efficiency and quality and not risk selection.