Predictability of drug expenditures: An application using morbidity data

The growth of pharmaceutical expenditure and its prediction is a major concern for policy makers and health care managers. This paper explores different predictive models to estimate future drug expenses, using demographic and morbidity individual information from an integrated healthcare delivery organization in Catalonia for years 2002 and 2003. The morbidity information consists of codified health encounters grouped through the Clinical Risk Groups (CRGs). We estimate pharmaceutical costs using several model specifications, and CRGs as risk adjusters, providing an alternative way of obtaining high predictive power comparable to other estimations of drug expenditures in the literature. These results have clear implications for the use of risk adjustment and CRGs in setting the premiums for pharmaceutical benefits.Drug expenditure, risk-adjustment, morbidity, clinical risk groups

Population based resource allocation: The use of hybrid risk adjustment

The emphasis on integrated care implies new incentives that promote coordination between levels of care. Considering a population as a whole, the resource allocation system has to adapt to this environment. This research is aimed to design a model that allows for morbidity related prospective and concurrent capitation payment. The model can be applied in publicly funded health systems and managed competition settings. Methods: We analyze the application of hybrid risk adjustment versus either prospective or concurrent risk adjustment formulae in the context of funding total health expenditures for the population of an integrated healthcare delivery organization in Catalonia during years 2004 and 2005. Results: The hybrid model reimburses integrated care organizations avoiding excessive risk transfer and maximizing incentives for efficiency in the provision. At the same time, it eliminates incentives for risk selection for a specific set of high risk individuals through the use of concurrent reimbursement in order to assure a proper classification of patients. Conclusion: Prospective Risk Adjustment is used to transfer the financial risk to the health provider and therefore provide incentives for efficiency. Within the context of a National Health System, such transfer of financial risk is illusory, and the government has to cover the deficits. Hybrid risk adjustment is useful to provide the right combination of incentive for efficiency and appropriate level of risk transfer for integrated care organizations.Health expenditures, hybrid risk-adjustment, morbidity, clinical risk groups

Estimates of patient costs related with population morbidity: Can indirect costs affect the results?

A number of health economics works require patient cost estimates as a basic information input. However the accuracy of cost estimates remains in general unspecified. We propose to investigate how the allocation of indirect costs or overheads can affect the estimation of patient costs in order to allow for improvements in the analysis of patient costs estimates. Instead of focusing on the costing method, this paper proposes to highlight changes in variance explained observed when a methodology is chosen. We compare three overhead allocation methods for a specific Spanish population adjusted using the Clinical Risk Groups (CRG), and we obtain different series of full-cost group estimates. As a result, there are significant gains in the proportion of the variance explained, depending upon the methodology used. Furthermore, we find that the global amount of variation explained by risk adjustment models depends mainly on direct costs and is independent of the level of aggregation used in the classification system.Patient costs, Clinical Risk Groups, Variation explained, Overhead allocation