Adjusting Medicare capitation payments using prior hospitalization data

Health Care Financ Rev. 1989 Summer;10(4):17-29.


The diagnostic cost group approach to a reimbursement model for health maintenance organizations is presented. Diagnostic information about previous hospitalizations is used to create empirically determined risk groups, using only diagnoses involving little or no discretion in the decision to hospitalize. Diagnostic cost group and other models (including Medicare's current formula and other prior-use models) are tested for their ability to predict future costs, using R2 values and new measures of predictive performance. The diagnostic cost group models perform relatively well with respect to a range of criteria, including administrative feasibility, resistance to provider manipulation, and statistical accuracy.

Publication types

  • Research Support, U.S. Gov't, Non-P.H.S.

MeSH terms

  • Capitation Fee*
  • Costs and Cost Analysis / trends
  • Data Collection
  • Diagnosis-Related Groups / economics*
  • Fee Schedules
  • Fees and Charges*
  • Health Maintenance Organizations / economics*
  • Hospitalization / economics
  • Medicare / organization & administration*
  • Models, Theoretical*
  • Probability
  • Reimbursement Mechanisms
  • United States