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Risk adjustment of capitation payments to behavioral health care carve-outs: How well do existing methodologies account for psychiatric disability?

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  • Susan Ettner
  • Richard Frank
  • Tami Mark
  • Mark Smith

Abstract

This study used 1994–1995 administrative data from a large public employer to examine the viability of commercial risk adjustment systems for setting capitation payments to competing behavioral health care “carve-outs”. The ability of Hierarchical Condition Categories and Adjusted Diagnostic Groups to predict psychiatric expenditures was improved by controlling separately for psychiatric disability. However, even the best models underpredicted expenditures of patients with psychiatric disability by 15%. Relative to full capitation, “mixed” payment systems and soft capitation reduce the ability of carve-outs to earn disproportionate profits by enrolling healthy patients and avoiding sick ones, yet also diminish incentives for cost containment. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Susan Ettner & Richard Frank & Tami Mark & Mark Smith, 2000. "Risk adjustment of capitation payments to behavioral health care carve-outs: How well do existing methodologies account for psychiatric disability?," Health Care Management Science, Springer, vol. 3(2), pages 159-169, February.
    • Handle: RePEc:kap:hcarem:v:3:y:2000:i:2:p:159-169
    DOI: 10.1023/A:1019033105715
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    Cited by:

    1. Tami L. Mark & Ronald J. Ozminkowski & Adele Kirk & Susan L. Ettner & John Drabek, 2003. "Risk Adjustment for People with Chronic Conditions in Private Sector Health Plans," Medical Decision Making, , vol. 23(5), pages 387-405, September.
    2. John Robst, 2009. "Development of a Medicaid Behavioral Health Case-Mix Model," Evaluation Review, , vol. 33(6), pages 519-538, December.
    3. Raghavan, Ramesh, 2010. "Using risk adjustment approaches in child welfare performance measurement: Applications and insights from health and mental health settings," Children and Youth Services Review, Elsevier, vol. 32(1), pages 103-112, January.

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