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Reducing Healthcare Costs Through Patient Targeting: Risk Adjustment Modeling to Predict Patients Remaining High-Cost Jonathan A. Wrathall Intermountain Healthcare, [email protected]

Tom Belnap Intermountain Healthcare, [email protected]

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Recommended Citation Wrathall, Jonathan A. and Belnap, Tom (2017) "Reducing Healthcare Costs Through Patient Targeting: Risk Adjustment Modeling to Predict Patients Remaining High-Cost," eGEMs (Generating Evidence & Methods to improve patient outcomes): Vol. 5: Iss. 2, Article 4. DOI: https://doi.org/10.13063/2327-9214.1279 Available at: http://repository.edm-forum.org/egems/vol5/iss2/4

Reducing Healthcare Costs Through Patient Targeting: Risk Adjustment Modeling to Predict Patients Remaining High-Cost

Abstract Context: The transition to population health management has changed the healthcare landscape to identify high risk, high cost patients. Various measures of patient risk have attempted to identify likely candidates for care management programs. Pre-screening patients for outreach has often required several years of data. Intermountain Healthcare relied on cost-ranking algorithms which had limited predictive ability. A new risk- adjusted algorithm shows improvements in predicting patients’ future cost status to facilitate identifying patient eligibility for care management.

Case Description: A retrospective cohort study design was used to evaluate high-cost patient status for two of the next three years. Modeling was developed using logistic regression and tested against other decision tree methods. Key variables included those readily available in electronic health records supplemented by additional clinical data and estimates of socio-economic status.

Findings: The risk-adjusted modeling correctly identified 79.0% of patients ranking among the top 15% of costs in one of the next three years. In addition, it correctly estimated 48.1% of the patients in the top 15% cost group in two of the next three years. This method identified patients with higher medical costs and more comorbid conditions than previous cost-ranking methods.

Major Themes: This approach improves the predictive accuracy of identifying high cost patients in the future and increases the sensitivity of identifying at-risk patients. It also shortened data requirements to identify eligibility criteria for case management interventions.

Conclusion: Risk-adjustment modeling may improve management programs’ interface with patients thus decreasing costs. This method may be generalized to other healthcare settings.

Acknowledgements Acknowledgements: The authors would like to thank Andy Merrill, MS for his contributions.

Keywords Value/Cost, Care Coordination, Population Health

Disciplines Other Medicine and Health Sciences | Social Statistics

Creative Commons License

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

This case study is available at EDM Forum Community: http://repository.edm-forum.org/egems/vol5/iss2/4

Reducing Health Care Costs Through Patient Targeting: Risk Adjustment Modeling to Predict Patients Remaining High Cost

Jonathan Wrathall, PhD;i Tom Belnap, MS

iIntermountain Healthcare

Context: The transition to population health management has changed the healthcare landscape to

identify high risk, high cost patients. Various measures of patient risk have attempted to identify likely

candidates for care management programs. Pre-screening patients for outreach has often required

several years of data. Intermountain Healthcare relied on cost-ranking algorithms which had limited

predictive ability. A new risk-adjusted algorithm shows improvements in predicting patients’ future cost

status to facilitate identifying patient eligibility for care management.

Case Description: A retrospective cohort study design was used to evaluate high-cost patient status

for two of the next three years. Modeling was developed using logistic regression and tested against

other decision tree methods. Key variables included those readily available in electronic health records

supplemented by additional clinical data and estimates of socio-economic status.

Findings:

and more comorbid conditions than previous cost-ranking methods.

Major Themes: This approach improves the predictive accuracy of identifying high cost patients in the

future and increases the sensitivity of identifying at-risk patients. It also shortened data requirements to

identify eligibility criteria for case management interventions.

Conclusion: Risk-adjustment modeling may improve management programs’ interface with patients

thus decreasing costs. This method may be generalized to other healthcare settings.

ABSTRACT

Generating Evidence & Methods to improve patient outcomes

eGEMs

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Wrathall and Belnap: Predicting Patients Remaining High-Cost

Published by EDM Forum Community, 2017

Introduction

In the face of rising health care costs, many voices

within the health care industry have called for

changes toward a more sustainable approach to

health care with emphasis on population health

management.1 In this paper, we describe modeling

techniques used to improve identification of high-

cost patients likely to benefit from care management

interventions. The modeling techniques described

below do not require a resource intensive approach

and may provide a means for other health systems

to improve their own patient-intervention targeting.

One objective of population health management

at Intermountain Healthcare is to facilitate the

transition from a traditional “fee-for-service” system

that compensates providers for services rendered,

with a “fee-for-value” approach in which providers

promote health among a defined patient cohort.

This approach emphasizes improving outcomes and

quality of service, and lowering overall health care

costs.2 This new health care climate requires changes

to existing delivery systems in order to meet the

needs of the community in ways that focus on the

triple aim of improving the experience of care, the

health of the population, and the cost of health care.3

Case Description

Intermountain Healthcare is an integrated delivery

system based in Salt Lake City, Utah consisting of 22

hospitals and over 185 clinics. Intermountain has been

actively engaged in developing programs designed

to improve outcomes for defined patient populations

that may require additional resources beyond the

standard of care provided through a patient-centered

medical home. One of these programs, known as

Community Care Management (CCM), is designed

to provide high intensity care management to high-

cost, complex patients. This program is designed

to help patients navigate the health care system

with the goal of preventing avoidable utilization

and slowing the progression of chronic conditions.

The CCM teams specialize in in-home assessments,

interdisciplinary care, intensive care coordination,

and community integration. This program was

designed to decrease catastrophic health episodes

through patient education, disease management, and

connection to community resources. To accomplish

this, CCM teams are expected to improve the

timeliness of care, improve medical coordination

to reduce complications, and foster community

relationships. These initiatives are intended to

decrease overall health care costs primarily through

avoiding unnecessary care or overutilizations.

In order for CCM programs to be successful, it

is critical to identify and target the right patient

population. To accomplish this, the stakeholders

originally created a list of eligible patients via

a ranking methodology, or Rank Algorithm,

centered on reasonably simple inclusion criteria.

In order to be eligible for the program, patients

must be at least 18 years old, live within 30 miles

of the program location, not already be enrolled

in a care management program, be insured by

Intermountain’s affiliated health plan or be uninsured,

and have health care costs in the top 10 percent of

patients for the last year and in the top 15 percent

of patients in one of the preceding two years.

Patients meeting the inclusion criteria were then

ranked equally based on the four following inclusive

factors; prior year health care spending, the Charlson

Comorbidity Index Score,4 and two proprietary risk

scores available within the organization—the IndiGO

Expected Benefit Score5 and the Optum Prospective

Risk Score6. Patients were ranked independently

by each factor, then rankings were averaged across

the factors to get an overall rank. The patient with

the lowest overall score was prioritized first, and the

CCM staff was expected to invite patients into the

program based on the order of the prioritized list.

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The goal of this approach was to provide an

objective enrollment process that was likely to enroll

patients who would both benefit from the program

and have enough cost savings potential to make the

program viable. While the original approach was

largely based on past health care spending, it did

provide an objective approach to enrolling patient in

the CCM program. These elements were used to rank

patients based on historical data in order to guide

patient outreach in the upcoming year. As a result,

there were limitations to the Rank Algorithm that

became apparent in the program over time.

The implementation team worked closely with the

CCM clinical staff to implement the use of the Rank

Algorithm. Over time there was ongoing feedback

and refinement to the tool in order to ensure it was

meeting the program’s needs. The Rank Algorithm

resulted in clinical staff taking significant time

to review patient charts and appraise potential

candidates. Many patients were considered ineligible,

they declined to participate or their high cost

episodes had resolved. As a result, there was a need

to revisit the approach and methods used to identify

patients and put in place something that better

identified patients for the CCM program.

The team undertook an evaluation of the original

patient selection process and tried to identify how

the process had been used and how it could be

improved moving forward. This evaluation identified

several drawbacks to the ranking method, which held

two important consequences. First, retrospective

patient identification meant the system was less able

to introduce appropriate health care interventions

until after a health crisis, thus patients were able

to be candidates for care management only when

they had already experienced an acute episode.

Second, a retrospective targeting method required

significant time before patients accumulated enough

utilization and cost to be identified as eligible

for additional services. Additionally, this ranking

method relied somewhat on opaque, third-party

proprietary algorithms to establish clinical risk. These

algorithms could not be calculated on all patients

and were difficult for the clinical staff to interpret.

Going forward, a predictive algorithm was needed

to identify rising risk patients before they became

medically complex and high cost. To accomplish this,

a new algorithm has been developed to incorporate

an approach that better predicts future patient costs

and refines patient targeting. With these changes,

there is an increasing ability to identify at-risk

patients and to better engage them in their care.

Recent discussions of high-cost patient prediction

have included debate as to the importance of

administrative or clinical data sources.7 As part

of the recommendations made by Cucciare et al.,

the revised prediction methodology was modified

to take advantage of gains introduced by both

administrative and clinical data. In recent years,

high-cost patient prediction has increasingly

included an element of prior years’ cost data as a

means of predicting future patient costs. Doing so

leads to better predictions than those obtained by

patient demographics alone.8,9 Alternative studies

have shown that a combination of clinical and

demographic data has also proved useful as a means

to predict future patient costs.10,11,12,13

A retrospective cohort study design was used with

logistic regression to evaluate high-cost patient

status for two of the next three years, and was

termed the “Logistic Model.” The study sample

consisted of patients in the top 15 percent of health

care costs from January 1 to December 31, 2011

comprising 26,173 unique patients. Training data

consisted of a random selection of 75 percent of

the total sample while the remainder were reserved

for the test data set. Because of the emphasis on

patient enrollment in a Care Management program,

similar inclusion criteria were adopted from the Rank

Algorithm that included living adults over age 18,

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patients not already enrolled in a care management

program, uninsured patients or those covered

by Intermountain Healthcare’s insurance arm,

SelectHealth, and patients living within 30 miles of a

care management clinic. SelectHealth customers and

the uninsured were included as a group of patients

for which Intermountain Healthcare has assumed

financial risk.

Health care costs for the study excluded

chemotherapy, dialysis, intravenous (IV) therapy,

spinal fusion, and knee and hip replacement.

However, patients with these procedures could

still be included if they had significant health

care costs in other areas. It was determined that

these conditions could not be impacted by the

interventions provided by care management teams.

Key predictors used in logistic regression modeling

included age with gender and marital status derived

from patient records. Socioeconomic factors

included Average Household Income in the patient

ZIP code based on the 2010 U.S. Census and the

Area Deprivation Index (ADI) score in the patient

Census block.14 Dummy variables were used for ADI

values greater than 115. Supplementary indicators

were used for behavioral health conditions,

additional comorbidities including obstructive sleep

apnea, morbid obesity, coronary artery disease,

hyperlipidemia, hypertension, and the count of

Charlson Comorbidities.15,16 Charlson Comorbidities

and behavioral health conditions included in the

analysis are shown in Table 1. Summary statistics

on the training sample are included in Table 2. All

analyses were performed using R software for

statistical modeling and computing.17

Table 1. Charlson Comorbidities and Behavioral Health Conditions Included In Logistic Regression

Modeling

CHARLSON COMORBIDITIES BEHAVIORAL HEALTH CONDITIONS

Myocardial Infarction

Cancer

Connective Tissue Disease-Rheumatic Disease

Chronic Pulmonary Disease

Cerebrovascular Disease

Metastatic Carcinoma

Dementia

Moderate or Severe Liver Disease

Diabetes with complications

Diabetes without complications

Mild Liver Disease

Peripheral Vascular Disease

AIDS/HIV

Peptic Ulcer Disease

Congestive Heart Failure

Renal Disease

Paraplegia and Hemiplegia

Schizophrenic Disorders

Depression Disorders

Bipolar Disorders

Affective Disorders

Organic Psychotic Conditions

Nonorganic Psychoses

Neurotic Disorders

Personality Disorders

Alcohol/Drug Dependence

Eating Disorders

Childhood/Adolescence Disorders

Intellectual Disability

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Findings

The results presented here were aimed at predicting

the likelihood of a patient being in the highest 15th

percentile for costs in two of the next three years

for patients already in the top 15th percentile in the

last year as described in the Logistic Model. Many of

these metrics for the number of identified patients

are somewhat arbitrary. If we identify the likelihood

of being a high-cost patient in the future, there

could be a range of optimal likelihoods that could be

used. For example, determining the likelihood of a

50 percent chance of being in the top 15 percent of

costs in the next two years would result in a larger

patient cohort compared to those with a 95 percent

chance. Due to constraints of the CCM teams, the

number of manageable patients was estimated to

be about 2,000. These results reflect an optimal

match between the predicted likelihood of patient

targeting and the number of patients with whom

CCM teams might intervene. We report the results of

targeting patients with likelihood score greater than

0.85 based on the fitted population being in the top

15th percentile of high-cost patients in two of the next

three years. The original Rank Algorithm utilized by

CCM predicted 63 percent of patients from the prior

year would remain in the top 15th cost percentile for

one of the next three years. Using logistic regression

and additional sociodemographic covariates, the

Logistic Model increased the predicted likelihood

from 63 to 79 percent. Additionally, the Logistic

Model demonstrated increases in the predicted

likelihood of prescreening patients remaining in

the top 15th percentile of cost for two of the next

three years from 31 to 48 percent. The C-statistic,

representing the “goodness of fit” of each model,

also increased from .54 under the ranking model to

.71 using logistic regression. Estimates indicate the

patient cohort overlap to be less than 10 percent

between the two models. Additional results of

patient targeting methods are presented in Table

3. The Logistic Model shows gains in identifying

medically complex patients, namely among those

with additional chronic comorbidities, behavioral

health conditions, obesity, and hypertension.

Alternative validation analyses were also conducted

using decision tree methods including Classification

and Regression Tree (CART) and Random Forest

methodologies. CART is built on logical if-then

Table 2. Summary Statistics of Training Sample

VARIABLE PERCENT VARIABLE MEAN (SD)

Percent Female 66.34% Comorbidity Count

1.29 (1.26)

Percent White 92.48% Age 46.8 (14.9)

Percent Married 71.21% Mean ZIP Income $63,311 ($16,372)

Percent with Hypertension 40.35% Prior Year Health Care Costs

$13,213 ($16,711)

Percent with Obesity 30.22%

Percent with Behavioral Health Condition 55.95%

Percent with Area Deprivation Index > 115 10.57%

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conditions that partition data based on different

predictors. Predictions in CART are based on

stratifying the predictor space into regions and

making predictions based on the mean of the

total observations in each region. Random Forest

methodology utilizes bootstrapping to stabilize

the pathways of possible alternative outcomes. For

this test, the number of bootstrap iterations was

500. Both methods are considered alternatives to

regression methods in tuning variable importance

and selection used in predictive modeling. However,

neither test was found to increase the C-statistic of

outcome prediction.

Major Themes

In the search for sustainable health care, many

health care systems are turning to data for help

in understanding the health of their population.

The approaches used here demonstrate gains

in identifying the patients most likely to benefit

from patient intervention programs. The Logistic

Model described above relies primarily on patient

demographics, including the socioeconomic context

of the patient and patient health care cost in the last

year, to predict the future likelihood of being a high-

cost patient in two of the next three years. We claim

that the use of widely available patient demographic

information in combination with rudimentary clinical

data may be more predictive of high-cost patients

beyond alternative ranking methods such as the

Rank Algorithm, which rely on lengthy accumulated

cost history and third-party clinical risk-adjustment

indices.

Because of the cyclical nature of care episodes,

many high-cost patients will have decreasing health

care spending over time. As episodes resolve, there

is significant “regression to the mean” that occurs

within this patient population. Consequently it

becomes increasingly important to identify the

subset of the population that is likely to remain

high cost in the future. The Rank Algorithm relied

too heavily on past cost and was not designed

to effectively predict future health care spending

beyond relying on past trends. Since the Logistic

Model has been implemented, CCM clinic staff have

become more efficient in selecting the right patients,

Table 3. Results of Patient Targeting Methods

MEASURE RANK ALGORITHM LOGISTIC MODEL

Average, SD Prior Year Cost $38,700 ($27,256) $44,000 ($61,125)

Average, SD Number of Charlson Comorbidities 3.6 (1.9) 5.0 (2.4)

Average, SD Number of Behavioral Health Conditions 1.7 (1.3) 2.2 (1.84)

Average, SD Number of Other Comorbidities 1.4 (.98) 2.3 (1.2)

Percent of Patients with Area Deprivation Index > 115 (Top Quintile)

16.9 18.0

Percent of Patients Diagnosed With Behavioral Health Condition

63.2 82.8

Percent of Patients Diagnosed With Obesity 27.8 54.9

Percent of Patients Diagnosed With Hypertension 59.3 80.3

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which has resulted in a reduced overall burden of

vetting patients.

Additionally, the gains from a regression-based

patient targeting model provide the advantage

that engagement with future high-risk patients

could occur in multiple ways. For example, patient

outreach could happen at the point of care, in

proactive outreach settings such as the CCM case

setting described above, or by delivery systems or

payers with access to the necessary data used in the

statistical modeling itself. These data are relatively

common to most electronic medical record systems

and reduce the data requirements from three years

to one year of retrospective patient history. Using

one year of data to make predictions is beneficial

because it allows systems to more accurately target

the segment of the at-risk population most likely to

benefit from additional services and support. More

precise allocation of services can reduce waste and

improve access to care, which is particularly valuable

throughout the population health transition many

health systems are currently facing. Conversely,

in the era of “big data” there may be common

acceptance of the assumption that more data is

better to use in predicting overall health outcomes.

In this instance, health systems struggling to

make use of emergent data systems need not feel

overwhelmed by a lack of large or highly fine-tuned

data systems. Our Logistic Model was developed on

relatively few predictors on open-sourced software.

Furthermore, we found, at least for the time being,

that regression tree methods that rely on large data

sets were less effective in obtaining greater modeling

accuracy than traditional regression methods.

This study has several limitations. First, we claim

to have increased the ability to target high-

cost patients by using predictive methods over

a rudimentary ranking system in the pursuit of

reducing health care costs and improving patient

outcomes. We do not claim to show that predictive

methods can account for all these changes. Because

the study relied upon retrospective data for the

use of future cost prediction, we merely speak to

methodological updates in patient identification

and leave additional research to quantify how much

downstream interventions may be able to reduce

costs. Second, this modeling may not account for

all the health conditions that may cause patients

to be high risk in the future. The approach shown

here represents a parsimonious prediction strategy,

having compared multiple predictor variables and

methods. Due to its parsimony, the Logistic Model

may prove to be a useful starting point for alternative

health care systems to engage in their own high-

cost patient targeting intervention strategies.

However, data training and testing was performed

on a sample of patients with relatively homogenous

demographics living in the intermountain western

United States. This sample may represent a patient

population with inherently different risk factors

and health care needs than patients in another

geographic location. While the Logistic method was

not explicitly tested against the IndiGO or Optum

indices directly, the lower performance of both

indices combined as included in the Rank Algorithm

did not warrant additional independent testing. The

unanticipated finding surrounding the limited utility

of third-party algorithms underscores the need for

health systems pursuing population health initiatives

to be sensitive to the unique characteristics of their

population. In the present study, we found that

third-party predictive algorithms trained on other

populations were less helpful than training data on

our own population.

Conclusion

Many strategies have been implemented in the

search for health care delivery strategies that help

patients manage illness and reduce waste. High-

cost patient targeting can aid care management

teams to effectively focus their efforts on those

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in the most need of intervention. Compared to

alternative modeling techniques, our Logistic Model,

based on administrative and basic socioeconomic

context data as well as information on chronic

health conditions, increases the predictive ability to

target at-risk patients. Using this model can shorten

the time requirements to identify patients who

are most likely to benefit from case management

interventions, thus decreasing cost burdens to

hospitals and patients alike. It is possible that this

approach may prove helpful to other health care

settings seeking to establish patient intervention

programs of their own.

Acknowledgements

The authors would like to thank Andy Merrill, MS for

his contributions.

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