Disease-adjusted Financial Benchmarks Report
Patients with similar clinical conditions tend to have similar home health lengths of stay and resource needs. Healthcare Market Resources, Inc. has studied thousands of home health agencies across the country and has observed a pattern that patients with different primary diagnoses have different episodes per discharge, average case weight, and LUPA (Low Utilization Payment Adjustment) percentages.
Do You Know the Impact of Patient Mix on Your Performance?
Thus, an agency’s overall performance is actually the weighted sum of the financial benchmark performance of these specific patient populations. Since each patient diagnosis group performs differently, one can conclude that differences in patient mix can affect overall agency financial indicator performance.
By adjusting for the impact of patient mix, a more accurate picture of agency performance across key financial indicators (e.g. episodes per discharge, average case weight index and LUPA percentage) can be seen. Agency management can readily see if variances from norms are caused by the type of patients admitted or the agency’s operations.
For the most relevant comparison, Healthcare Market Resources, Inc. utilizes the local market standards. Our national database of Medicare claims allows us to create customized regional (multi-county) benchmarks. Local market comparisons are very powerful tools, since all the agencies within the geography face the same daily challenges (e.g. same physician practice patterns, same socioeconomic demographics, same state Medicaid policies, and same healthcare delivery capacity and biases).
How to Calculate a Disease-Adjusted Financial Benchmark
Each adjusted benchmark is calculated by multiplying the agency’s financial indicator for each primary diagnosis by the appropriate percentage of the corresponding local market primary diagnosis group. The chart below illustrates the relationship for each indicator. Print out our sample report to review along with the below.
| Agency Financial Indicator | X | Local Market Percentage = Market Weighted by Diagnosis |
|---|---|---|
| # Episodes per Discharge (Row A) | X | % of Discharges (Row D) |
| LUPA Percentage (Row B) | X | % of Episodes (Row E) |
| Average Case Weight (Row C) | X | % of Full(non-LUPA) Episodes (Row F) |
As shown in the Idaho Home Health Hospice example:
- The # in Row A (Episodes per Discharge) is multiplied by the % in Row D (% of Discharges) for each primary diagnosis. The resulting numbers are then summed to produce the financial benchmark in Row G.
- Similarly, the LUPA % for each primary diagnosis in Row B is multiplied by the corresponding % of Episodes in Row E. Once again, the resulting numbers are then summed to produce the financial benchmark shown in Row H.
- Finally, as explained above, Row C is multiplied by Row F to produce Row I.
Understanding Your Disease Adjusted Financial Benchmarks
In our example, the profiled agency saw that its episodes per discharge were not materially impacted by its disease mix, while its performance on LUPA percentage and case weight improved, when patient disease mix was taken into account. The disease-adjusted financial indicators represent the agency’s performance, having been normalized for the agency’s disease mix. Management can then understand how much of their performance on a given indicator is dependent on the types of patients coming in the door and how much reflects the agency’s operations. Based on this information, you can better decide how to approach your performance variations.