Comparing Accuracy of Risk-Adjustment Methodologies Used in Economic Profiling of Physicians

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This paper examines the relative accuracy of risk-adjustment methodologies used to profile primary care physician practice efficiency. Claims and membership data from an independent practice association health maintenance organization (HMO) were processed through risk-adjustment software of six different profiling methodologies. The Group R² statistic was used to measure, for simulated panels of HMO members, how closely each methodology's cost predictions matched the panel's actual costs. All but one methodology explained at least 50% of panel cost variance with panels as small as 25 patients. Group R² performance tended to be better when high-cost cases were included rather than excluded from the analyses.

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