The Analysis of Variation I

The Analysis of Variation I

Care – An Episode of 

Methodology

Presentation To the Health Economics Resource August 17, 2011David Redfearn, Ph.D.Advanced Analytics Senior Consultant Advanced Analytics, Senior ConsultantHealth Services Actuarial, WellPoint
Physician Cost-Efficiency 

Methodology - Overview

• Agenda

• Preface – The Analysis of Variation in Cost Of Care• Ingenix/Symmetry Episode Treatment Group Methodology• WellPoint Cost-Efficiency Methodology – Goals• WellPoint Cost-Efficiency Methodology – Step By Step• Reliability and A Statistical Basis for Classifying Cost Reliability and

A Statistical Basis for Classifying Cost

-Efficienc

Efficienc

• Questions and Discussion
The Analysis Of Cost Variation

• The method is really an approach to the measureme

The method is really an approach to the measureme

categorization of variation in cost of care

• We can analyze variation by condition (episode of care)

We can analyze variation by condition (episode of care)

by specialty, by place of treatment (inpatient/outpatient), component (management, surgery, facility, ancillary, and 

• Originally developed for the analysis of physician “co

• But, not really “efficiency” in the Economic sense – we d

o tcome data outcome data

• “Quality” measurement not part of this methodology (han

separately in network development) separately in network development)

• Methodology yields an “efficiency score”, but it cannot b

effectively without understanding the underlying variation 

uncertainty
Episode Of Care Models

• We use the Ingenix/Symmetry Episode Treatment G

We use the Ingenix/Symmetry Episode Treatment G

methodology

• ETG model is complicated, but not a ETG model is complicated, but not a “Black Box Black Box”

• Fully documented in http://www.ingenix.com/transpa• Model beingp y developed and enhanced continuously

• Updated clinical model• Risk-Adjusted ETGs• Improved reporting files (e.g., provider attribution)

• Not the only model in use in the Health Care Industry

• Thompson: Medstat Episode Groups (MEG)• Cave Consulting: Cave Episode Groups
ETG Methodology

• ETGs are an illness classification methodology ETGs are an illness classification methodology• ETGs create episodes by collecting all inpatient, outp

pharmacy and ancillary services for a patient into clinpharmacy and ancillary services for a patient into clin

homogeneous, mutually exclusive and exhaustive ca

• ETGs assign a unique classification (an Episode Tre

Group) and severity level to these episodes reflecting clinical condition for the episode and the complicationcomorbidities that impact treatment comorbidities that impact treatment

• ETGs identify the start date and end date of episodes

• Acute ep y isodes may recur over time• Chronic episodes are assumed to last forever and are a

analysis

• Individual patients may have multiple active episodes at 
ETG Methodology
Clean Period Methodology – W

An Episode Start and End? An Episode Start and End?

• Defined dynamically Defined dynamically

– from the claim data from the claim data

– based o

based o

dates and member eligibility – not fixed

• Clean period requirements are specified for each ET

Clean period requirements are specified for each ET

• Acute ETGs generally have clean periods of 90 days or • Chronic EGGs 

g y p y

enerall

y have clean 

periods of 365 da

ys 

types of episodes are generally annualized for analysis)

• To determine the start date, when the grouper finds a 

it looks backward in time to make sure this Dx has nowithin the defined clean period

• Once an episode starts the claim records are tracke

Once an episode starts, the claim records are tracke

time until the defining Dx disappears for the defined cthe last defining Dx marks the end of the episode
Comp pp lete and Incomplete Epis

• Depends on both claim dates and patient eligibility Depends on both claim dates and patient eligibility• Complete Episode

• True start/finish dates known True start/finish dates known• Claim period and patient eligibility encompasses the clean 

defined for the ETG

• Incomplete Episode - Unknown start and/or finish date

• Assume claim analy g yp 

sis and member eligibility period is Ja

2009 through December 31, 2010

• Acute Bronchitis has a defined clean period of 30 days

• First Acute Bronchitis Dx observed on January 15, 2009 

start

• First Acute Bronchitis Dx observed on December 15, 201

finish
ETG Number Format

ETG N b (XXXX X ETG

Num

ber (XXXX XX X X X) Ni Di it N 

X

X X) Nine Di

git

N
ETG Number Example

ETG Base Class Number ETG Base Class Number ETG Base Class ETG Base Class ETG Number Full 

Description

ETG Number Full 

163000 Diabetes 163000000 Diab

w/o c

163000001 Diab

Diab

w/o c

163000010 Diab

w/ co

163000011 Diab

w/ co

163000100 Diab

w/o c

163000101 Diab

w/o c

163000110 Diab

como

163000111 Diab

como
ETG Severity

• Many (not all) ETGs are classified into severity levels Many (not all) ETGs are classified into severity levels• Severity is specific to the ETG – this is not a patient r

and cannot be averaged across episodes for a patienand cannot be averaged across episodes for a patien

• Severity level is directly related to episode costs• Diabetes has four levels of severity( g 

$ from Ingenix N

• Diabetes Severity Level 1 - $1,519• Diabetes Severity Level 2 - $2,274• Diabetes Severity Level 3 - $2,923• Diabetes Severity Level 4 - $4,382

• Risk adjusted ETGs are used in the cost-efficiency a
Typ p es Of Episodes

• Episodic

• Acute Conditions• Chronic Conditions Chronic Conditions

• Non-Episodic

• Screening & Immunizations Screening & Immunizations• Ongoing drug therapy without provider intervention

• Ungroupable

• Invalid Diagnosis and Procedure Codes• “Orphan” records
Ep p isode Cost Components

• ETG Grouper decomposes total episode costs ETG Grouper decomposes total episode costs

• (Professional) Management Costs• (Professional) Surgical Costs (Professional) Surgical Costs• Facility (Hospital/Facility Costs)• Inpatient Ancillary Services (Lab Radiology Pathology 

Inpatient Ancillary Services (Lab, Radiology, Pathology, 

• Outpatient Ancillary Services (Lab, Radiology, Pathology• Pharmacy

• We use Discounted Covered Charges – Eligible char

app y g p o de d scou s, bu be o e app y g e 

lying provider discounts, but before applying mem

payments and deductibles – also known as “Gross C
ETGs As A Foundation Method

• Advantages

• Clinical validity and homogeneity – particularly when sev

are used are used

• Encompasses all types of utilization (inpatient, outpatien

professional, ancillary, Rx)

• Related to total treatment costs for a specific condition

• Disadvantages

• Complex methodology• Dependent on administrative claim data• Patient eligibility gaps can affect validity• Need high claim volume for increased validity
Analysis Goals

1. E ll t f Encompass all cost of care – P f i l I tit ti l I ti t I 

Professional, Institutional Inpatient, I

Outpatient, and Drugs

2. Exclude non Exclude non-specific routine and preventive care episodes from t

specific, routine, and preventive care episodes from t

3. Risk adjust ETGs where variation in patient risk influences episode 

Patients are Sicker”)

4. Calculate expected episode costs based on state-wide, specialty-s5. Assign a “responsible” provider for each episode6. Calculate the cost-efficiency ratio for each physician based on spe

ETG case mix adjusted cost per episode

7. Account for potential variation in the cost-efficiency ratio via statist

(confidence intervals) that take into account both volume and varia

8 Perform analysis at both the physician (License Number) and Grou

. Perform analysis at both the physician (License Number) and Grou
Encompass All Costs of Care

• All types of administrative claim data is used All types of administrative claim data is used – profes

profes

institutional inpatient, institutional outpatient, ancillarypharmacy

• Note: Outpatient Rx data may be missing for some mem

episodes for these members are analyzed separately

• Inpatient hospital costs are included

• Some have argued that these costs should be excluded 

ph sician can’t directl control these costs physician can’t directly control these costs

• We have analyzed the data both including and excluding 

and the differences are minor and the differences are minor

• Physician hospital admission choice is an important part 

efficiency
Inclusions and Exclusions

• Incomplete acute episodes are excluded from the analysis Incomplete acute episodes are excluded from the analysis• All chronic episodes are included – but episode costs are 

based on the member eligibility when less than 365 days p

• W l d ll We exclu

de all non-specifi ETG ( I l t d Si S 

ific ETGs 

(e.g., Isola

t

e

d Signs, 

Sy

Non-Specific Diagnoses or conditions) which have highly vaverage costs

• We exclude preventive care ETGs (e.g., Routine Inoculatio

do not want to penalize physicians for purely preventive se

• We exclude all episodes where we could not identify a res

physician (missing or invalid license number or when a hoonly provider involved in the episode) or for Rx maintenanthat do not involve a physician

• We exclude all episodes flagged as cost outliers (based on 

normative database)

• We exclude all e

pisodes with zero cost
Volume Considerations

• Having a sufficient volume of data for analysis is imp

Having a sufficient volume of data for analysis is imp

• Efficiency comparisons are made episode by episode• Some have argued for a minimum of 30 episodes for eve

Some have argued for a minimum of 30 episodes for ev

every comparison

• Applying exclusions (for theoretical reasons Applying exclusions (for theoretical reasons – previo

previo

reduces volume

• For a recent analysis, these exclusions reduced the e

volume by 47% (from 19 million episodes to 10 millio

• Anthem Blue Cross has the largest PPO membership 

California (over 6 million members) California (over 6 million members) – and we still hav

and we still hav

episode volume for some comparisons

• We have over 50,000 contracting network physicians 

, g py

of these physicians account for about 80% of claim v
Assigp y n Responsible Physician

• We assign responsibility for the episode to a single p

We assign responsibility for the episode to a single p

• Based on highest physician cost for surgical episodes• Based on highest physician Based on highest physician-patient visit count (direct co

patient visit count (direct co

medical episodes

• Must account for at least 30% of the cost or visits in t

Must account for at least 30% of the cost or visits in t

• A number of other alternatives are available in the cu

model

• Time: first visit in the episode, latest visit in the episode, • Specific physician specialty• Multiple physicians can be assigned to the episode (one 

• Note that about 70% of all episodes involve only a si

thi i t i bi i th

– so this assignment is unambiguous in those cases
Peer Cost Comparisons

• Average episode cost (ETG Base + Severity Level) are ca

Average episode cost (ETG Base + Severity Level) are ca

state-wide data – separately by medical specialty

• Analysis is performed separately for patients with and with

benefits

• Physicians have insisted on “peer” comparisons – to other 

with the same medical specialty

• Using same-specialty peer comparisons also (partially) ad

patient severity

• Diabetic p gy g 

atients being treated by Endocrinologists are like

seriously ill than those treatment by Family Practitioners or Practitioners

• Average normative costs for many ETGs vary significantly 

Average normative costs for many ETGs vary significantly even after adjusting for ETG severity category

• However – if there is a “best practice” standard of care, an

severity is accounted for why would episode costs vary by severity is accounted for, why would episode costs vary by 
Phy py sician Specialty

• It is important that we correctly classify medical spec

It is important that we correctly classify medical spec

• Our provider database can hold up to four specialties for 

physician, and often the first physician, and often the first-listed specialty does not rep

listed specialty does not rep

physician’s actual practice

• Sub-specialties like Rheumatology or Pulmonology or Ca

li t I t l M di i th i i i lt list Internal Medicine as their primary specialty

• Misclassifications of provider specialty can bias cost-effi

co pa so s mparisons

• We choose the first listed Board certified specialty if a• We are investigg 

ating methods that can be used to im

specialty based on practice patterns (from the episod

• Or, we could ask physicians to assign themselves – 

i lt d t t b d t ?

specialty do you want to be compared to?
Reliability Issues

• We calculate an Observed (Physician) to Expected (S

We calculate an Observed (Physician) to Expected (S

Norm) Ratio – used to evaluate cost-efficiency

• Based on a normative case Based on a normative case-mix matching that of the spe

mix matching that of the spe

• Ratio greater than 1.0 is “cost-inefficient”• Ratio less than 1.0 is Ratio less than 1.0 is “cost-efficient efficient”

• Point estimate (ratio) may be unreliable

• Small sample sizes• Natural variability in physician performance• Unmeasured p (p j 

atient characteristics (incomplete risk adju

• We use statistical measures to control for this variab

confidence intervals)
Confidence Intervals

• We calculate 95% confidence intervals around Observed t

We calculate 95% confidence intervals around Observed t

ratios

• Confidence intervals take into consideration both volume (

count) and variability (variation in ETG costs) count) and variability (variation in ETG costs)

• Better than a static volume criterion (e.g., minimum of 30 e• Statistically, we have a 95% confidence that the “true” ratio 

the lower and upper CI points

• If the Upper CI is less than 1.0, we say the physician is “co• If the Lower CI is greater than 1.0, we say the physician is If the Lower CI is greater than 1.0, we say the physician is 

inefficient”

• Otherwise, we say we “Don’t Know” if the physician is effic

inefficient

• A substantial proportion of physicians fall into the “Don’t Kn

• The Efficiency classification cannot be interpreted and use

d t di f th d l i i ti i t

understanding of the underlying variation in costs
Summary

• Method is complex Method is complex• Data quality (and completeness) is important!• High variability by disease (ETG) Patient and Cost C

High variability by disease (ETG), Patient and Cost C

• Quality measurement (outcome data) is needed for a 

picture – true economic efficiency

• Interpret with caution!
Questions and Discussion

• Q ti ues ons• Contact Information:

• david.redfearn@wellpoint.com• (702) 586-6316