The High Cost of Incomplete Risk Stratification in Healthcare

Published on June 4, 2020

The U.S. spends more on healthcare than any other developed nation, yet health costs continue to rise, and outcomes fail to improve. In many instances, the lack of a coordinated societal approach to social determinants of health (SDoH) contributes to this unsustainable situation. Unfortunately, risk stratification models also fail to account for these influential factors, like SDoH, and that’s a costly problem.

An analysis of National Health Expenditure conducted by Peterson Center on Healthcare and KFF (Kaiser Family Foundation) indicates:

  • “Health spending* totaled $74.6 billion in 1970. By 2000, health expenditures had reached about $1.4 trillion, and in 2018 the amount spent on health had more than doubled to $3.6 trillion.”
  • “Per capita, health spending has increased over 31-fold in the last four decades… In constant 2018 dollars, the increase was about 6-fold, from $1,832 In 1970 to $11,172 in 2018.”

For health plans and health systems, these costs are complicated by additional factors, like reimbursement rates, which are falling even as insurers and providers are increasingly accountable for health outcomes.

Shortcomings of Claims-Based Risk Stratification

In a value-based system, plans and providers thrive by helping patients and members achieve optimal health outcomes while reducing utilization costs as much as possible. Established risk stratification tools measure clinical risk and condition risk based largely on available claims data, which can fall short of predicting total risk and rising risk.

Several problems impede their view, including

  • incomplete or inaccurate claims data,
  • the static, fixed quality of the data, and
  • an inability to predict changes in utilization.

A More Complete Picture of Health Risk

To assess and predict health risk accurately, Carrot Health’s Social Risk Grouper (SRG) offers a more holistic understanding of patients and members. The SRG is based on information on 255 million adult Americans, with up to 5,000 different variables from over 80 unique data sources. They lead to powerful insights on an individual’s risk of SDoH — the source of approximately 80% of a person’s health status.

By categorizing individuals based on the impact SDoH risks might pose on health outcomes, including loneliness, housing instability, health literacy, and socio-economic status, the SRG offers a complete picture of health risk. Specifically,

  • The SRG taxonomy scores every adult in the U.S.
  • The SRG applies consumer data to four broad categories (behavioral, economic, social, and environmental) and locally stratify each as high, medium, or low risk.
  • An SRG score has a range of 0-99, relative to the cost, utilization, morbidity, and mortality risk of an individual in terms of the SDoH they face.

How it helps/why it matters

We like to compare SRG scores to the individualized FICO scores used by lending institutions. FICO scores are longitudinal (i.e., attached to a person for a lifetime) but change over time depending on new variables. Traditional sources of healthcare data — like risk stratification —cannot achieve this, and as such, they do not paint a picture of the true risk of SDoH.

With the SRG from Carrot Health, healthcare organizations can

  • address non-clinical factors that influence health and care outcomes;
  • assess how likely it is that a member/patient will follow treatment plans and adopt healthier behaviors;
  • manage and support patients and members more effectively; and
  • triage new members who have no prior engagements.

As a result, having current and actionable data within their workflow strengthens the efforts of care managers, health coaches, community health workers, and peer recovery specialists. Healthcare organizations can make more strategic decisions about allocating resources, including targeted interventions that reduce costs and improve outcomes.

For additional details on Carrot Health’s Social Risk Grouper, download the free white paper: “Dynamic Risk Stratification: Incorporating SDoH, Engagement, and Adherence Data to Predict Holistic and Rising Risk.”

* The report defines this as “the amount spent on healthcare and health-related activities (such as administration of insurance, health research, and public health), including expenditures from both public and private funds.”

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