ABSTRACT
In this chapter, we will assume that we have chosen and defined our measures and data sources in alignment with the purpose of our analysis. Regarding the purpose of risk adjustment, Iezzoni (2013) lists as follows: to set payment levels for individual patients, to encourage providers to accept high-risk patients, to compare efficiency and cost across plans/providers, to give performance report cards for the public and to allow benchmarking for quality improvement. The latter three will be our focus. We will outline what risk adjustment is, why and when it’s needed, some alternatives to it (these will crop up often in the discussion), some principles for doing it and how we might assess how well we’ve done it. The next chapter will cover how the risk-adjustment model leads to a risk-adjusted outcome for each unit: there’s a surprisingly large number of ways this can be done, and they don’t all give the same answers.
