Adjusting Population Risk for Functional Health Status

Abstract Risk adjustment accounts for differences in population mix by reducing the likelihood of enrollee selection by managed care plans and providing a correction to otherwise biased reporting of provider or plan performance. Functional health status is not routinely included within risk-adjustment methods, but is believed by many to be a significant enhancement to risk adjustment for complex enrollees and patients. In this analysis a standardized measure of functional health was created using 3 different source functional assessment instruments submitted to the Medicare program on condition of payment. The authors use a 5% development sample of Medicare claims from 2006 and 2007, including functional health assessments, and develop a model of functional health classification comprising 9 groups defined by the interaction of self-care, mobility, incontinence, and cognitive impairment. The 9 functional groups were used to augment Clinical Risk Groups, a diagnosis-based patient classification system, and...