Tiered PCP Network–Cost Measurement Methodology

Blue Cross Blue Shield of Massachusetts (BCBSMA*) Tiering Overview Primary care physicians (PCPs) were tiered at the practice group level. Tiering placements were based on a combination of quality and cost measures. Each group was initially placed in the Standard Benefit tier and moved to the Enhanced Benefit or Basic Benefit tier based on cost and quality performance. Quality measures include a set of indicators reflecting nationally accepted and validated measures in two broad categories: Clinical Process and Patient Care Experience. Performance on cost was based on health status adjusted total medical expense per member per month (PMPM). Final tiering designation was based on a combination of cost and quality performance. This document explains the methodology for the cost measures. Cost Scores Used for Tiering Metric:  Health Status (HS) Risk-Adjusted Total Medical Expense (TME) per member per month (PMPM)  TME incorporates both fee-for-service and non-fee-for-service (e.g., incentive bonuses, management fees and risk surplus/deficit) expenses.  The HS Adjustment uses DxCG’s “concurrent-explanation model.” Data:  HMO/POS fully insured and self insured populations with claims incurred 7/1/2006 – 6/30/2007 and paid through 11/2007  Claims for members who incurred $100k+ in claims in the measurement period are capped at $100k. Methodology (see example below):  PCPs are tiered at the group level (one or more providers), based on the Group Provider Listing.  Provider groups are separated into five geographic regions: Greater Boston, Northeast, Southeast, Central, and Western.  For each group, the risk-adjusted TME is evaluated and benchmarked separately for pediatric patients (age 0-17) and adult patients (age 18+).  The risk-adjusted TME for the group’s pediatric patients is compared to the risk-adjusted TME for the region’s pediatric patients to calculate the group’s pediatric cost score.  The risk-adjusted TME for the group’s adult patients is compared to the risk-adjusted TME for the region’s adult patients to calculate the group’s adult cost score.  Cost scores are normalized such that both the regional and adult regional benchmarks are set to 1.0.  The group’s pediatric and adult efficiency scores are blended by the respective pediatric and adult membership to calculate the group’s overall cost score.
Provider Group A B C % Pediatrics (Membership) 75% 25% 5% Pediatric Cost Score: (Group HS-Adj TME) / (Region HS-Adj TME) 0.5 0.5 2.5 % Adults (Membership) 25% 75% 95% Adult Cost Score: (Group HS-Adj TME) / (Region HS-Adj TME) 1.0 1.0 1.1 Overall Cost Score 0.63 0.88 1.17

*BCBSMA comprises Blue Cross Blue Shield of Massachusetts, Inc., and Blue Cross Blue Shield of Massachusetts HMO Blue®, Inc.

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Treatment of Insufficient Data:  Groups with an average of fewer than 500 HMO/POS members over the measurement period are considered to have insufficient data for reliable cost measurement.  Groups with an average of 500 -1,000 HMO/POS members over the measurement period are considered partially credible and will be treated as follows: The group’s own experience will be given an experience credibility percentage weight and the remainder of the weighting will be applied to the regional average. The experience credibility percentage weight is based on the group’s membership and follows a linear scale with 500 members corresponding to 50 percent credibility weight and 1,000 members corresponding to 100 percent credibility weight (see example below).
Average Membership 700 850 (B) Group Overall Cost Score 1.20 0.90 (C) Regional Average Cost Score 1.00 1.00 (D) Group Experience Weight 70% 85% (E) Regional Average Weight 30% 15% (B*D + C*E) Credibility Weighted Overall Cost Score 1.14 0.92

Group A B

Performance Benchmark for Cost Measurement: • High-performance benchmark: Overall Cost Score less than 0.96 • Potential for placement in Enhanced Benefit Tier • Low-performance benchmark: Overall Cost Score exceeding 1.10 • Placement in Basic Benefit Tier

PEP-3076K (4/08)

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