Population Based Resource Allocation: The Use of Hybrid Risk Adjustment

Abstract

The emphasis on integrated care implies new incentives that promote coordination between levels of care. Considering a population as a whole, the resource allocation system has to adapt to this environment. This research is aimed to design a model that allows for morbidity related prospective and concurrent capitation payment. The model can be applied in publicly funded health systems and managed competition settings. Methods: We analyze the application of hybrid risk adjustment versus either prospective or concurrent risk adjustment formulae in the context of funding total health expenditures for the population of an integrated healthcare delivery organization in Catalonia during years 2004 and 2005. Results: The hybrid model reimburses integrated care organizations avoiding excessive risk transfer and maximizing incentives for efficiency in the provision. At the same time, it eliminates incentives for risk selection for a specific set of high risk individuals through the use of concurrent reimbursement in order to assure a proper classification of patients. Conclusion: Prospective Risk Adjustment is used to transfer the financial risk to the health provider and therefore provide incentives for efficiency. Within the context of a National Health System, such transfer of financial risk is illusory, and the government has to cover the deficits. Hybrid risk adjustment is useful to provide the right combination of incentive for efficiency and appropriate level of risk transfer for integrated care organizations.