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In: Wrightson CW, eds. Financial strategy for managed care organizations: rate setting, risk adjustment, and competitive advantage. Ann Arbor, MI, USA: Health Administration Press:165-225.
Health Services Research and Development Center, Johns Hopkins School of Public Health, Baltimore, MD, USA
Health-based risk adjustment is the process by which the health status of populations is taken into consideration when determining payment rates or assessing provider performance. One of the most dynamic developments within the actuarial and healthcare financial management fields is the application of population-based techniques to account for health status differences within and across managed care plans. This chapter is intended to provide background in this area and to introduce readers to practical risk adjustment techniques that are used both to facilitate rate setting and to monitor resource use.