Using diagnoses to describe populations and predict costs

The Diagnostic Cost Group Hierarchical Condition Category (DCG/HCC) payment models summarize the health care problems and predict the future health ca re costs of populations. These models use the diagnoses generated during pa tient encounters with the medical delivery system to infer which medical pr oblems are present. Patient demographics and diagnostic profiles are, in tu rn, used to predict costs. We describe the logic, structure, coefficients a nd performance of DCG/HCC models, as developed and validated on three impor tant data bases (privately insured, Medicaid, and Medicare) with more than 1 million people each.