Episode of care analysis reveals sources of variations in costs.

OBJECTIVES

To understand and reveal the underlying sources of inter- and intraplan variation in a selected number of chronic and procedural episodes.

STUDY DESIGN

Analysis of allowed claims from 9 regional health plans covering commercially insured populations in different areas of the United States.

METHODS

Use of the PROMETHEUS Evidence-Informed Case Rates analytics to 1) calculate total plan costs and cost of specific episodes, 2) create price and severity adjustments, and 3) determine coefficients of variation.

RESULTS

The interplan coefficients of variation for total per member per year costs and per episode costs vary from 0.1 to 0.55, while the intraplan coefficients of variation vary from 0.4 to 5.5. In both analyses, the coefficients of variation for potentially avoidable complications (PACs) were higher than the coefficients of variation for typical costs.

CONCLUSIONS

There is significant variation in episode costs within a plan, and PACs have significantly more variation than typical costs. Plans and accountable care organizations would benefit from understanding the source of variation of their episode costs in order to improve overall cost of care.