Use of risk adjustment in setting budgets and measuring performance in primary care I: how it works

Healthcare systems in countries throughout the developed world are faced wi th the problem of limiting the growth in spending on health services while ensuring that their populations have access to appropriate care. The United Kingdom is no different in this respects and the past 20 years have seen t he introduction of numerous initiatives aimed at improving the efficiency, of the NHS. Approaches adopted by the NHS to help improve efficiency includ e the introduction of capitation based budgets and increased monitoring of providers' performance. In the United States similar pressures to improve t he efficiency of the healthcare system have led to the wide scale adoption of fixed budgets and monitoring of healthcare providers. Diagnosis based methods for adjusting risk are becoming increasingly common within the US managed healthcare industry. The objective of risk adjustmen t is to help ensure that budgetary allocations or provider assessments take into account the morbidity of individual patients. In this and a subsequen t article, we will describe this still evolving process and discuss its pos sible implications for the NHS, particularly for the new primary care organ isations. There are various methods for carrying out risk adjustment but we have used the Johns Hopkins adjusted clinical group system to show how ris k adjustment works. The system is particularly relevant to,primary care and is the most widely used method of measuring population case mix in the Uni ted States.