OBJECTIVES: This study aims to compare the performance of diagnosis-based risk adjustment methods based on the episode-based cost to utilize in episode-based efficiency measurement.

METHODS: We used the health insurance claims data from South Korea, the Health Insurance Review and Assessment Service – National Patient Sample (HIRA-NPS). A separate linear regression model was constructed using 2018 HIRA-NPS, depending on the Major Diagnostic Category (MDC). Individual models included explanatory (demographics, types of insurance, institutional types, diagnosis-based risk adjustment methods) and response variables (episode-based costs). The model’s risk adjustment methods were as follows: Refined Diagnosis Related Group (RDRG), Charlson Comorbidity Index (CCI), National Health Insurance Service Hierarchical Condition Categories (NHIS-HCC), and Department of Health and Human Service-HCC (HHS-HCC). The accuracy of models was compared using R-squared (R²), Mean Absolute Error (MAE), and Predictive Ratio (PR). External validity was evaluated using HIRA-NPS in 2017.

RESULTS: The model including RDRG improved mean R² from 34.2% to 38.5% compared to the adjacent DRG. However, RDRG was inferior to both HCCs (RDRG, 38.5%; NHIS-HCC, 40.6%; HHS-HCC, 41.4%), though it was superior to CCI. We observed the variability of model performance depending on MDC groups. While both HCCs had the highest explanatory power in 11 MDCs, including MDC P (Newborns), RDRG showed the highest adjusted R² in 6 MDCs, such as MDC O (Pregnancy, childbirth, and puerperium). The average MAEs were the lowest in the model with RDRG (KRW 1,297,000). The PRs showed similar patterns between models in the following subgroups: age, sex, institutional types, types of insurance, and upper and lower ten percentile of actual costs. External validity also showed a similar pattern in the model performance.

CONCLUSIONS: This research showed the applicability of both HCCs to adjust comorbidities, excluding complications, for episode-based costs in the process of efficiency measurement.