The Impact Of Non-Traditional Factors On Healthcare Risk Adjustment

October 1, 2023by SHMA

Healthcare risk adjustment is a crucial step in ensuring the fair distribution of resources within the healthcare sector. Traditional risk adjustment models rely on variables like age, gender, and diagnosis codes to estimate anticipated costs. However, as the healthcare industry evolves, non-traditional variables are becoming increasingly important.

Variables such as geography, BMI, education, and income can also explain variations in healthcare costs. These variables have not been included in risk adjustment programs due to their non-traditional nature or potential legal or privacy-related concerns. If these non-traditional variables explain significant variation in cost beyond traditional models, it may incentivize issuers to select specific members, potentially affecting their financial performance. This could undermine the policy goals of the risk adjustment programme.

The Traditional Approach

In the past, healthcare risk adjustment models predominantly focused on factors like age and gender, and basic clinical data such as diagnosis and treatment codes. These models were primarily designed to aid payers such as insurance companies and government healthcare agencies like the Centers for Medicare & Medicaid Services (CMS) in allocating funds to healthcare providers based on their group’s anticipated health risks.

However, this approach has drawbacks as it often fails to capture a view of a patient’s health condition leading to inadequate risk adjustment. Two patients who share the same diagnosis code can experience different health outcomes because of various factors, including their socioeconomic status, lifestyle choices, and psychological influences on their health.

Although non-traditional factors like geography, BMI, education, and income can also help to explain variations in healthcare costs, risk adjustment models frequently contain demographic and clinical markers. These non-traditional factors might give issuers motivation to choose particular members, which could have an impact on their financial viability.

The Health Section of the Society of Actuaries supported an in-depth investigation to better understand the relationship between non-traditional characteristics and healthcare costs. This research aimed to improve risk adjustment programs by addressing the influence of non-traditional factors on the selection process. The study’s findings highlighted the need to adjust the conventional risk assessment model to account for these non-traditional variables.

To assess the potential impact of non-traditional variables on risk adjustment programs, the study introduced a new measure called the Loss Ratio Advantage (LRA). The non-traditional factors considered in the study included aspects related to lifestyle, psychological self-assessment, economic self-assessment, and demographic self-assessment, which were broadly categorized into these groups. The objectives of the exercises were to comprehend how atypical variables affected healthcare risk adjustment.

Impact of Non-traditional Factors

Elements that deviate from the normative criteria and influence a person’s well-being and medical expenses are classified as “non-traditional” vectors. Integrating these variables enhances accuracy in gauging risks. Discussed below are various non-conformist factors alongside their consequences for evaluation and interpretation:

  1. Socioeconomic Condition: Income, educational background, and employment position disproportionately sway healthcare access, behavioural patterns, and overall physical results. Incorporating socioeconomic status into risk adjustment models effectively illustrates these disparities.
  2. Health-related Conduct: Smoking habits, excessive drinking, dietary choices, as well as physical activity all significantly contribute to individual health outlook. Detailed insight into such behaviours better helps us assess potential health risks.
  3. Social Determinants of Health: Stable housing arrangements and transport convenience along with robust support networks play vital roles in affecting healthcare utilization and shaping outcomes significantly.
  4. Psycho-emotional Precursors: Stress levels and feelings of disconnection can substantially impact both general physical condition and utilization of medical services, as mental health disorders often do. Integrating these factors enhances precision in risk adjustment.
  5. Historical Healthcare Usage Records: Drawing upon information regarding past medical encounters – such as counting stays at hospitals or emergency room visits – proves instrumental when foreseeing forthcoming care necessities.
  6. Environmental Variables: These play a vital role in shaping an individual’s wellness and their propensity for utilizing medical resources. Variables like climate conditions, geographical residence, and pollution density exert substantial influence on these aspects.

In essence, non-traditional factors have a significant influence on healthcare provision. They shape ideas to recognize the importance of various aspects, thereby improving the accuracy of models used for predicting imminent healthcare needs.

Advantages of Utilizing Non-traditional Factors

  1. Incorporating non-traditional variables into risk evaluation models promises a more comprehensive analysis of the patient’s well-being, resulting in more precise forecasts for potential risks.
  2. Non-traditional elements help tackle health disparities and ensure objective, fair risk management across various patient groups.
  3. Pinpointing particular patients with particular atypical danger indicators allows healthcare professionals to implement preventive measures as well as customized interventions—thus reducing future medical costs significantly.
  4. In Population Health Management, non-conventional metrics enable healthcare organizations to better supervise healthy conditions among their patients—an angle that in the long run enhances results and cuts expenses.

Constraints and Reflections on Consideration

While appending uncommon indicators into medical risk evaluations is encouraging, several concerns need addressing:

Data Accessibility: Ensuring the availability & precision of data regarding these non-standard factors can be challenging. In such cases, healthcare institutions must develop robust protocols for data acquisition & sharing initiatives.

Privacy & Ethical concerns: With sensitive data like socioeconomic or psychosocial information, care must be taken not only to adhere to privacy laws but also to ethical principles when gathering & sharing such information.

Model Complexity: As we involve further variables, risk adjustment models could become more complex, requiring advanced analytical approaches along with computing prowess.

The importance of non-traditional variables in healthcare risk measurements should never be overlooked, especially when the landscape keeps evolving. Developing a comprehensive risk evaluation approach that incorporates demographics and clinical summaries beyond the ordinary is crucial if we aim for fairness and precision in our appraisal standards. Through the implementation of unconventional attributes, caregiving entities can enhance quality and reduce inequities, ultimately improving efficiency and efficacy within our healthcare structure, leading to better-managed patient populations.