Health Care Financing Administration 7500 Security Blvd., Baltimore, MD. 21244-1850

A -- RESEARCH OF RISK ADJUSTERS FOR MEDICARE-MEDICAID DUAL POPULATION IN ARIZONA LONG-TERM CARE POC Renee Wallace, Contract Specialist, 410-786-5128 The Health Care Financing Administration (HCFA) intends to award under Simplified Acquisition Procedures, a firm fixed price award, on a sole source basis to Laguana Research Associates, 1604 Union Street, San Francisco, California 94123. This award will provide for research and study of risk adjustors, for Medicare-Medicaid dual populations in Arizona and New Mexico. The contractor offers experience in Medicaid long-term care and risk adjustment issues, and has prior experience in research and evaluation of dual populations. The contractor has expertise in risk adjustment research methodology, and first han knowledge if state programs and has access to the necessary data bases. The contractor can provide critical data mass for risk adjustment analysis. Contractor shall comparatively present relevant program characteristics in the Arizona Long-Term Care System (ALTCS) and in New Mexico Medicaid programs. The contractor shall describe both programs in terms of benefit structures, eligibility criteria, and participating providers. It should include detailed description of a type of information collected in each state including patient assessment instruments. Contractor will analyze ALTCS data, that contains information on service use and cost, and patient assessments for Arizona ALTSC beneficiaries and Medicaid long-term care beneficiaries in New Mexico. Supplementing the state Medicaid data bases with HCFA Medicare National Claims History files from the concurrent period, the contractor shall develop comprehensive information about use and cost. The contractor shall analyze and present information of cost and utilization in total and by type of service for the dually eligible population. The summary statistics will include separate and combined Medicaid and Medicare program cost, utilization rates and patterns of services by age, gender eligibility status, and other factors deemed relevant by the contractor. The data may be broken down into detailed types of services, such as inpatient hospital, outpatient,evaluation and management services, procedures, and ancillary services. The contractor shall test the performance of two risk adjustment models (PIP-DCG and HCC-DCG) both prospectively and concurrently on this population. Additionally, the contractor shall explore ways to supplement the diagnostic risk adjustment models with additional characteristics. The study will explore the impact of the two risk adjustment models (PIP-DCG and HCC-DCG) on explaining variation in expenditures for services used. Prospective risk adjustment research will based will on two subset data period, which is to be determined appropriately by the contractor. The contractor may sample subsets of the population based on partial or full eligibility status during the 21-month period for this study, and report results for sub samples. Given the unequal duration of the two data periods, the contractor shall investigate appropriate weighting techniques to annualize the data period. Actual and predicted costs will be compared. Measures of the predictive accuracy will include the mean absolute prediction error, the standard deviation of the absolute predication unmodified DCG model, the contractor shall also estimate a single (multiplicative) risk factor that maximizes the predictive power of the model. Exploratory analyses will be conducted to improve predictive power by adding functional status variables or other varibles of interest such as placement in home or nursing home care, urban/rural, ethnicity, cash assistant status. Alternative models may be developed for different purposes. In a payment model, however, equal considerations must be given to the efficiency aspect of payment system as well as predictive power of the model. The contractor will maintain a close communication with the HCFA project officer, and update the progress regularly during the project period. Findings from the project will be written as a final report. The report should include program characteristics, population data, risk adjustment results, and sensitivity analysis results. Also, prepare a manuscript version of the report to seek a peer-reviewed publication. All responsible sources may submit capability statements for consideration to the Agency at the above address. Numbered Note 22 Posted 06/26/98 (0177)

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