Episode-Based Price Indexes: Plans and Progress Ana Aizcorbe Nicole Nestoriak

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Episode-Based Price IndexesPlans and
ProgressAna AizcorbeNicole Nestoriak
BEA Advisory Committee Meeting May 4, 2007
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There is a growing consensus that price indexes
for health care should be based on treatment
episodes.

• Previous work for specific diseases shows that
  the issue is numerically important
• Heart attacks (Cutler et. al.)
• Cataract (Shapiro/Wilcox)
• Depression (Berndt et. al.)
• National Academies Panel issued a recommendation
  for the construction of episode-based indexes.

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Preliminary work at BEA confirms the numerical
importance of the issue in a dataset that
includes a comprehensive list of diseases.
Comparison of Price Indexes for Medical Care,
2001-2003 (compound annual growth rates)
Provider-Based
Disease-Based
Source A. Aizcorbe and N. Nestoriak, Using
Commercially-Defined Episodes of Illness for the
Measurement of Health Accounts A Progress
Report, Paper presented at NBER/CRIW Summer
Institute, July 2006
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Outline of talk

• Provide a progress report on our ongoing work to
  construct these indexes for a health satellite
  account.
• Provide an outline of next steps
• Close talk with two important conceptual issues
  surrounding episode-based price indexes.

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Progress Report
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Groupers are one way to identify treatment
episodes.

• Episode groupers are algorithms that sift through
  claims data and
• Look at each claim and decide how the diagnoses
  fit together (comorbidities)
• After a period of time without claims, subsequent
  care is a new episode (clean days)
• We consider two commercial groupers (algorithms)
• Symmetry Health
• Medstat

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We apply these groupers to claims data from
Pharmetrics to explore implementation issues.

• Data contain a large number of claims
• 40 million patients
• Over 70 health plans.
• Our 10 sample contains
• 12 billion paid to providers,
• 22 million episodes of care (Symmetry Grouper),
  and
• About 600 different types of episodes.
• Price is the amount taken in by provider.

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What have we learned so far?

• Groupers do not always yield clinically
  homogeneous episodes
• Price indexes can be sensitive to
• how expenditures are allocated over time
• the parameters used in the algorithm
• features of the underlying claims data
• Bottom line these choices need theoretical
  justification

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1. Assessing homogeneity of episodes using
number of modes in distribution of episode
lengths

• We take the presence of more than one mode as
  evidence of heterogeneity.
• This may not present problems if the
  distributions are stable.

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2. Sensitivity of price indexes to expenditure
allocation

• Fluctuations in the average episode length
  accounts for measured differences in price/day
  vs. price/episode.
• We believe these fluctuations are an artifact of
  the data.

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3. Sensitivity of price indexes to choice of
grouper
Fisher Indexes of price per day

• Both the trends and contours differ.
• Odd seasonal pattern in the Medstat episodes
• Price per day declines with length of episode
• Symmetrys definition for chronic episodes

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4. Sensitivity of price indexes to underlying
data
Fisher Indexes of price per
episode ________________________________
Price growth is higher in the Ingenix
data... one can not appeal to law of large
numbers.
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Current thinking

• One cannot take literal read of data or episodes.
• Key is to find a way to use what is available to
  create a data set that is
• representative of all US patients,
• with clinically homogeneous episodes, and
• a sensible way to deal with chronic episodes

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Next steps

• Weve constructed standard errors for price
  indexes that we will use to address
• Homogeneity issue Is there a tradeoff between
  granularity and precision of the price indexes?
• Sensitivity of price indexes To what extent
  are differences in price indexes statistically
  significant?
• We will devise a plan for extracting a
  representative sample from the Pharmetrics
  database.
• Looking ahead, we would like to construct price
  indexes for other patients as well (i.e.,
  Medicare and Medicaid).

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Two Important Conceptual Issues
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Issue 1. Reweighting treatment-based indexes to
obtain price indexes by disease does not address
the substitution issue.

• Assume
• no change in the costs of therapy or drug
  treatment
• Treatment-based indexes will show no price change
  regardless of weights (Berndt).
• But, substitution of drugs for therapy reduces
  the cost of treating depression.
• An episode-based index captures this price
  decline.

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Issue 2. Qualifications for episode-based price
indexes.

• Episode-based price indexes capture declines in
  cost from the substitution across treatment
  types, provided the disease is defined correctly.
• These indexes implicitly assume that quality (the
  impact on health from treatment) is constant.
• To the extent that quality is increasing,
  disease-based indexes provide an upper bound on
  quality-adjusted price change.