Case-mix adjusted analyses of service utilization for a Medicaid health insuring organization in Philadelphia

Health Insuring Organizations (HIOs) are capitated plans that serve all of the Medicaid beneficiaries in a defined catchment area. While this approach to capitation eliminates the incentive to enroll only the healthiest beneficiaries in the area, it does not alleviate concerns that the HIO will respond to the incentives for efficiency created by capitation payment by underproviding services. The authors studied change in service utilization patterns produced by the HIO by using a multivariate strategy to identify case-mix groups at the population level to adjust analyses of hospital and nursing home utilization for case mix. This approach was applied to service utilization data for Medicaid beneficiaries in Philadelphia who received medical services from an HIO and for two control groups. In addition to identifying changes in service use, they evaluated the performance of the HIOs on three dimensions--access to care, quality of care, and the efficiency with which the care was provided. While limitations on the information available in the billing files did not allow definitive statements to be made regarding these issues, case-mix adjusted patterns of service use (and mortality) across sets of service may enable Medicaid programs to identify areas where problems in one of these three critical areas exist. This would allow the program to target its limited utilization and quality review resources toward the areas, types of people, and/or providers where problems in one or more of these areas are more likely.