Unbiased Analysis of Today's Healthcare Issues

Do global health ratings work?

Written By: Jason Shafrin - Dec• 15•08

Many health plans have used patient health ratings as important metrics for quality improvement.  The simplest way to evaluated the quality of a health plan is to ask all members to rate the plan from 1-10 and take the average score.  However, this simple averaging gives health plans an incentive to improve quality for low cost patients, but not for high cost patients.  Why is this?

Let’s say there are two people: Healthy Harry and Sick Sam.  Harry has one disease (disease A) while Sam has three diseases (diseases B, C, and D).  Initially, both receive average quality of care and thus rate the plan with the score of 5.  If the health plan wants to improve the quality of care, they could spend $10 extra dollars per person per disease to improve quality.  If they focus on disease A, Harry will give the health plan a rating of 10, but Sam will still give the health plan a rating of 5.  Thus, the global rating will be 7.5.

On the other hand, if the health plan decides to spend the $10 to improve the quality level for treating disease B, Sick Sam will experience a quality of care of 10 for disease B, but quality levels of 5 for diseases C and D.  Thus, Sam will give an average rating of (10 + 5 + 5)/3 = 6.67.   Harry will experience a quality level of 5, so that the health plan’s average global quality score would be 5.83.  This is less that the 7.5 score they would have receive if they focused their money and efforts on improving quality of care for disease A and Healthy Harry.

Glazer, McGuire, Cao and Zaslavsky (JHE 2008) offer a solution to this problem.  They suggest that ratings should be weighted by expected health expenditures.   A simple solution to calculate the weights would be to run a regression of expenditures on gender, age, smoking status, and general health.  The coefficients of the regression could be used weight the quality responses from members.

Using this expected expenditure weighting, the ratings from sicker patients–who utilize more medical services–will count more than the ratings of healthy individuals.  This will give health plans an incentive to improve quality to those who need it most.

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