1. What Ob-gyns Need to Know
Risk Adjustment
What Ob-gyns Need to Know
Welcome to the training. Today we will discuss what obstetricians and gynecologists should know about risk adjustment.

2. Learning Objectives
After completing this training, participants will be able to
Describe types of risk for payers and providers
Differentiate between risk adjustment and risk stratification
Analyze the vale of risk adjustment and risk stratification for their practice
Before we begin, let’s review today’s learning objectives. After participating in this training, participants will be able to describe the various types of risk for payers and providers, differentiate between risk adjustment and risk stratification, and analyze the value of these tools for their practice.

3. What Is Risk? Risk (for payers) Risk (for providers)
Occurs when a payer accepts fixed premium payments in return for an obligation to pay for services that may require spending beyond the total premium revenue received
Risk (for providers)
Occurs when a provider takes responsibility for delivering and/or arranging care in return for payment, even though the total payment for that care may differ from the total cost of delivering that care
Before we define risk adjustment, we need to define risk. The meaning of risk varies between payers and providers. Risk for payers occurs when a payer accepts fixed premium payments in exchange for an obligation to pay for services that may require spending beyond their total premium revenue received. Risk for providers occurs when a provider takes responsibility for delivering and/or arranging care in return for payment, even through the total payment for care may differ from the total costs of delivering that care.

4. Types of Risk For physicians and other providers Downside risk
Provider could incur costs that are greater than the payment received
Upside risk
Provider could receive payment that is more than the costs incurred for services
Insurance risk
Risk associated with factors outside the control of the provider
Performance risk
Risk associated with factors within the control of the provider
There are various types of risk that providers may face. These include downside risk, where a provider could incur costs that are greater than the payment received; upside risk, where a provider could receive payment that is more than the costs incurred for providing health care services; insurance risk, which is risk associated with factors outside the control of the physician; and performance risk, which is risk associated with factors within the control of the physician.

5. What Is Risk Adjustment?
Assesses the cumulative risk of each patient, and designates a certain amount of money to his or her care
Simply put, risk adjustment assesses the cumulative risk of each patient, and designates a certain amount of money to his or her care.

6. Risk Adjustment, continued
Health system moving from volume to value
Concerns about the equity of performance assessment
Beneficiaries with unique challenges
Beneficiaries with social risk factors
Tool used in payment models
To fairly compare providers to one another
Main differences in performance related to the quality of care provided rather than to patient factors over which providers have no control
Risk adjustment is a tool that can be used in payment models to fairly compare physicians to one another by accounting for the “risk” of caring for certain patient populations. Risk adjustment is employed to ensure that the main differences in performance among providers are related to the quality of care provided rather than to patient factors over which providers have no control. There is particular interest in using risk adjustment to control for patients with confounding social risk factors.

7. Risk Adjustment, continued
Viewed by most payers as a necessity
Primarily used in one of two ways
To increase or decrease the amount of payment for a service or bundle of services based on characteristics of the patient and other factors that are expected to require more or less spending for that patient
To adjust one or more of the measures of performance on quality, utilization, or spending that are used to determine the provider’s payment
Risk adjustment is used primarily in one of two ways. It is either used to increase or decrease the amount of payment for a service or bundle of services based on characteristics of the patient and other factors that are expected to require more of less spending for that patient, or it may be used to adjust one or more of the measures of performance on quality, utilization, or spending that are used to determine the provider’s payment. In other words, risk adjustment can be done at the payment or measure level.

8. Risk Adjustment, continued
Some risk adjustment models focus on types of services
Some risk adjust total spending on a patient population
Some individualized risk adjustment systems have been developed for specific procedures, conditions, or episodes of care
Not all risk adjustment models are the same. Some focus on types of services, while others risk adjust total spending on a patient population. In some cases, individualized risk adjustment systems have been developed for specific procedures or episodes of care.

9. Risk Adjustment, continued
There are many different types of risk adjustment
Claims-based risk adjustment
Clinical category risk adjustment
Concurrent risk adjustment
Prospective risk adjustment
Regression-based risk adjustment
There are numerous different types of risk adjustment. We’ll walk through each of these models individually.

10. Claims-based Risk Adjustment
Based only on claims data
May fail to capture patient factors not recorded on claims but may have a significant impact on spending and quality performance
Does not capture the specific stage of the disease for a patient with gynecologic cancer
Let’s start with claims-based risk adjustment. This variation is based only on claims data, and as such, may fail to capture patient factors that are not recorded through claims. For example, claims-based risk adjustment would capture that a patient has gynecologic cancer, but it would not capture the stage of the disease.

11. Clinical Category Risk Adjustment
Classifies patients into groups based on characteristics seen as affecting spending or other performance measures
Clinical categories are typically based on multiple characteristics
Example: Diagnosis Related Groups (DRGs)
Clinical category risk adjustment classifies patients into groups based on characteristics that are viewed as affecting spending or performance measures. An example is Diagnosis Related Groups, which we’ll discuss further in a couple of slides.

12. Concurrent Risk Adjustment
Information used to determine a risk score or risk category can include information about changes in a patient’s characteristics that occurred during the time period for which spending or performance is being measured
The concurrent nature of this system allows the payment for the patient to be modified
If a patient checks into the hospital in active labor, that information can be immediately integrated into the patient’s risk score and payment will be adjusted accordingly
Concurrent risk adjustment accounts for changes in a patient’s characteristics that occur during the time period for which spending or performance is being measured. This allows the corresponding payment for the patient to be modified overtime as their risk changes. For example, if a patient checks into the hospital in active labor, that information can be immediately integrated into the patient’s risk score and payment will be adjusted accordingly.

13. Prospective Risk Adjustment
Information used to determine a risk score or risk category for a patient will only include information about a patient’s characteristics prior to the time period for which payment is being made or performance is being measured
If a patient checks into the hospital in active labor, that information cannot be included in the patient’s risk score until the following year
In prospective risk adjustment, the information used to determine a risk score will only include information prior to the time period for which payment is being made or performance is being measured. In this case, if a patient checks into the hospital in active labor, that information cannot be integrated into the patient’s risk score until the following measurement period. This is true even though, all else being equal, we can expect a patient in active labor to require more health care services than a patient who is not in active labor.

14. Regression-based Risk Adjustment
Uses linear regression analysis to develop a formula for assigning risk scores to patients
Focuses on characteristics that are statistically best at predicting spending
Each patient is assigned a risk score by measuring them against the characteristics selected by the regression analysis and multiplying those measures by their respective weights
Example: Hierarchical Condition Categories (HCCs)
Regression-based risk adjustment uses linear regression analysis to develop a formula for assigning risk scores to patients. Each patient is assigned a risk score based on characteristics that are shown to predict health care spending. That score is then measured against characteristics selected by the regression analysis and multiplied by a respective measure weight. An example of regression-based risk analysis is hierarchical condition category codes, which we’ll discuss in more detail shortly.

15. Diagnosis Related Groups
A clinical category risk adjustment system
Uses diagnoses and procedures to identify patients expected to have similar costs during a hospital stay
Each DRG is assigned a weight
Reflects the cost of caring for patients in a category relative to other categories
DRG weight may vary for different payers if they have different patient populations
First lets turn back to Diagnosis Related Groups, our example of a clinical category risk adjustment method. Diagnosis related groups (or DRGs) use patient diagnoses and selected procedures to identify patients that re expected to have similar costs during a hospital stay. Weights for each DRG may vary for different payers if they have different patient populations.

16. Hierarchical Condition Categories
Hierarchical Condition Categories (HCC) is a risk adjustment model
Identifies individuals with serious or chronic illnesses
Assigns a risk factor score based on health conditions and demographic information
Health conditions reported by ICD-10 diagnoses via claims
9,000+ ICD-10 codes that link to 79 HCC codes for risk adjustment
Hierarchical condition categories (or HCCs) is a regression-based risk adjustment model that identifies individuals with chronic illnesses and assigns a risk factor score based on health conditions. These conditions are identified using ICD-10 diagnosis codes submitted in claims data.

17. What Is Risk Stratification?
The process of separating patient populations into groups based on risk
Considered crucial to successful population health management
It’s important to identify the difference between risk adjustment and risk stratification. Risk stratification is the process of separating patient populations into groups based on risk. Stratifying risk is considered a crucial tool in population health management, as it allows providers and insurers to segment their patient population.

18. When Is It Appropriate to Adjust or Stratify Risk?
Ongoing debate about appropriateness
Risk Adjustment and Risk Stratification
Risk can be adjusted in one of two ways
Via quality measures
Via payment
Payers decide whether to adjust quality measures and/or adjust payment (bonuses and penalties) for social risk
There is a great deal of debate among policymakers, health services researchers and others, about the appropriateness of risk adjustment and risk stratification, particularly whether or not social risk should be accounted for in value-based payment models.
Risk can be adjusted in one of two ways, either through quality measures or through payment. It is up to payers to decide whether to adjust for social risk at the measure or payment level. Let’s take a closer look at each of these risk adjustment mechanisms.

19. Adjusting for Risk in Quality Measures
Three key questions when adjusting for risk via quality measures (particularly social risk)1
Is the social risk factor related to the outcome?
If so, is the social risk factor directly related to the outcome, or is it mediated by other factors?
If there are mediating factors, are those factors beyond the control of the health care provider?
Some have argued that measures used for public reporting should be adjusted for social risk factors in order to “level the playing field” among providers. Others, however, argue that adjusting for social risk is inappropriate, and could potentially mask disparities in the quality of care provided by physicians. When adjusting for risk, particularly social risk, via quality measures, there are three key questions to consider: 1) is the social risk factor related to the outcome? 2) If so, is the social risk factor directly related to the outcome, or is it mediated by other factors? And 3) if there are mediating factors, are those factors beyond the control of the physician or other health care provider?
Adjusting at the measure level quickly becomes complex, as there are a number of factors that may contribute to differences in health status, some of which are under a provider’s control, and some of which are not.

20. Adjusting for Risk in Payment
Alter the mechanism by which performance is translated to payment
Adjustments in payment = bonuses or penalties
Recognizes challenges in achieving good outcomes for patients with confounding risk factors
Another method for accounting for social risk lies in not adjusting the measures themselves, but instead in altering the mechanism by which performance is translated into payment. Adjusting for risk at the payment level could be used to give bonuses to providers that serve a high proportion of beneficiaries with social or clinical risk factors. Such an approach recognizes the challenges inherent in achieving better health outcomes for patients with confounding social risk factors. This method also has the potential to offset concerns that in the absence of some type of accounting for social risk, value-based payment models could result in providers becoming reluctant to care for beneficiaries with confounding social risk factors, out of fear of incurring penalties for factors they have limited ability to control or influence.

21. Stratifying Risk
Stratifying patients into groups based on level of risk
should not jeopardize the quality of care they receive
Providers may be stratified
based on % of beneficiaries with social risk factors
allows for comparison to their “peers” – i.e., similar patient population or beneficiary mix
Similarly, it may not always be appropriate to employ risk stratification.
Stratifying patients into different groups based on level of risk should in no way jeopardize the quality of care the patients receive.
In some cases it may make sense to stratify or tier providers by their proportion of beneficiaries with confounding social risk factors or clinical risk factors. This would enable providers to only be compared to their “peers,” or other providers with a similar beneficiary mix.

22. State Example: New York2
The New York State Department of Health - Clinical Advisory Group (CAG)
Value-based payment strategies in maternity care
Maternity Bundle Playbook outlines the state’s bundled payment methodology, including risk adjustment
PROMETHEUS payment model includes the standard episode definition for maternity care
Four episodes: pregnancy, vaginal delivery, C-section, and newborn care
Let’s look at a state example. The New York State Department of health has created a Maternity Bundle Playbook outlining a bundled payment methodology, including risk adjustment, for maternity care. The model utilizes the PROMETHEUS definition for maternity care, and within the broad maternity bundle there are four unique episodes: pregnancy, vaginal delivery, cesarean section, and newborn care.

23. New York, continued Budgets for the episodes are set upon delivery
Delivery is risk-adjusted based on the mode of delivery
Other subtypes included for risk adjustment include:
High risk pregnancy, bad obstetric history
Antepartum hemorrhage
Gestational diabetes
Cardiovascular disease in mother
Low birth weight baby ( grams)
Budgets for the various episodes are set upon delivery. Each delivery covered by the bundle is risk-adjusted based on the mode of delivery, and can also be adjusted for a variety of other factors including high risk pregnancy or bad obstetric history, antepartum hemorrhage, gestational diabetes, cardiovascular disease in the mother, and a low birth weight infant.

24. New York, continued Calculate risk adjusted expected costs:
Total cost on a set of demographic and clinical risk variables is regressed
Results used to predict expected total cost based on demographic and clinical risk factors
NY state will investigate the risk adjustment model’s adequacy throughout the pilot
To calculate the risk adjusted expected costs, the total cost of certain demographic and clinical risk variables is regressed, and the results are used to predict expected total cost.
New York plans to evaluate the adequacy of their risk adjustment model for the maternity bundle throughout the program’s ongoing pilot. For more information on the New York model, be sure to check out the references slide at the conclusion of this deck.

25. Why Risk Adjustment Matters for Ob-gyns
Risk adjustment and stratification can be used to measure population health and can help ob-gyns succeed in value-based payment (VBP) arrangements
“Across all [reimbursement] models, the identification, stratification, and management of high-risk patients is central to improving quality and cost outcomes.” – Association of American Medical Colleges
Payers have the power to risk adjust at both the measure and payment level
If you are considering participation in a VBP arrangement, it is important to know if/how risk adjustment is calculated
As our health care system moves away from fee-for-service to a structure that rewards providers based on performance, risk adjustment and stratification will become useful tools that can help ob-gyns succeed. It is important to note once again that payers can decide to risk adjust at either the measure or payment level, or both. If you are considering participation in a value-based payment arrangement, it is important to know if and how risk adjustment is calculated.

26. Contact ACOG
For more information, visit Management
Send inquiries to
For more information, visit Send risk adjustment and risk stratification inquiries to

27. References
1 US Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation. Report to Congress: Social Risk Factors and Performance Under Medicare’s Value-Based Purchasing Programs. December New York State Department of Health. Maternity Care Clinical Advisory Group Value Based Payment Recommendation Report. May _maternity_rpt.pdf