Comparing Hospital Length of Stay Risk-Adjustment Models in US Value-Based Physician Payments

Backgroung and Objectives:Under the Affordable Care Act, the US Centers for Medicare & Medicaid Services created the Physician Value-Based Payment Modifier Program and its successor, the Merit-Based Incentive Payment System, to tie physician payments to quality and cost. The addition of hospital length of stay (LOS) to these value-based physician payment models reflects its increasing importance as a metric of health care cost and efficiency and its association with adverse health outcomes. This study compared the Centers for Medicare & Medicaid Services-endorsed LOS risk-adjustment methodology with a novel methodology that accounts for pre-hospitalization clinical, socioeconomic status (SES), and admission-related factors as influential factors of hospital LOS. Methods:Using the 2014 New York, Florida, and New Jersey State Inpatient Database, we compared the observed-to-expected LOS of 2373102 adult admissions for 742 medical and surgical diagnosis-related groups (DRGs) by 3 models: (a) current risk-adjustment model (CRM), which adjusted for age, sex, number of chronic conditions, Elixhauser comorbidity score, and DRG severity weight, (b) CRM but modeling LOS using a generalized linear model (C-GLM), and (c) novel risk-adjustment model (NRM), which added to the C-GLM covariates for race/ethnicity, SES, discharge destination, weekend admission, and individual intercepts for DRGs instead of severity weights. Results:The NRM disadvantaged physicians for fewer medical and surgical DRGs, compared with both the C-GLM and CRM models (medical DRGs: 0.49% vs 13.17% and 10.89%, respectively; surgical DRGs: 0.30% vs 13.17% and 10.98%, respectively). In subgroup analysis, the NRM reduced the proportion of physician-penalizing DRGs across all racial/ethnic and socioeconomic groups, with the highest reduction among Whites, followed by low SES patients, and the lowest reduction among Hispanic patients. Conclusions:After accounting for pre-hospitalization socioeconomic and clinical factors, the adjusted LOS using the NRM was lower than estimates from the current Centers for Medicare & Medicaid Services-endorsed model. The current model may disadvantage physicians serving communities with higher socioeconomic risks.