Analysis of the Validity of the Discretionary Component of Diagnostic Cost GroupAdjusters

摘要

The objective of this study is to investigate the validity of the discretionarycomponent of the DCG risk classification system of Ellis and Ash (1995). The discrectionary ratings employed in the DCG model of Ellis and Ash (1995) potentially serve a very important function since increased capitation rates (over a base group level) are not made for prior hospitalizations with diagnoses that are in one manner or another deemed to be 'discretionary'. A primary reason for excluding such discretionary admissions in the prior use DCG risk adjusters is the belief that a significant part of the observed lower hospital utilization rates of HMOs may be attributed to HMOs being more effective than the FFS sector in avoiding such admissions. The failure to remove discretionary admissions associated with HMO-FFS hospitalization practice patterns would penalize HMOs that were successful in controlling discretionary hospital use. This study tests the validity of the DCG discretionary ratings by assessing: the extent to which discretionary hospital admissions account for differences in the hospital admission rates of Medicare health maintenance organization (HMO) enrollees and Medicare fee-for-service beneficiaries; the extent to which discretionary hospital admissions account for geographic variations in the hospital admission rates of Medicare fee-for-service beneficiaries.