CRGs performance is comparable to other risk adjustment systems. CRGs have the potential to provide risk adjustment for capitated payment systems and management systems that support care pathways and case management.

Increased rates of acute outpatient visits among preterm infants with false-positive NBS screening results may be attributable to underlying chronic illness or parental anxiety. The absence of increased health care utilization among term infants may be unique to this Medicaid population or a subgroup phenomenon that was not detectable in this analysis.

The healthcare reform goal of increasing eligibility and coverage cannot be realized without simultaneously achieving control over healthcare costs. The reform of existing payment systems can provide the financial incentive for providers to deliver care in a more coordinated and efficient manner with minimal changes to existing payer and provider infrastructure. Pay for performance, best practice pricing, price discounting, alignment of incentives, the medical home, payment by episodes, and provider performance reports are a set of payment reforms that can result in lower costs, better coordination of care, improved quality of care, and increased consumer involvement. These reforms can produce immediate Medicare annual savings of $10 billion and create the framework for future savings by establishing financial incentives for long-term provider behavior changes that can lead to lower costs.

A patient-centered approach to defining episodes of care around a hospitalization can provide the basis for creating expanded bundles of services that can be used as the basis of payment. Paying by episodes of care strengthens the incentive to providers to deliver care efficiently. A hospital-based episode of care prospective payment system can be phased in over time by gradually expanding the services and the time period included in the episode. Establishing equitable prospective episode payment amounts requires that the severity of illness of the patient during the hospitalization and the chronic disease burden of the patient be taken into account.

The Ambulatory Patient Groups (APGs) are a patient classification system that was designed to be used as the basis of an Outpatient Prospective Payment System (OPPS). Although 6 major non-Medicare payers had implemented an APG-based OPPS between 1995 and 2000, the implementation of the Ambulatory Payment Classification (APC)-based Medicare OPPS shifted the focus of outpatient payment reform among payers to APC-based systems. Unfortunately, the APC OPPS is not really a prospective payment system and has become essentially a variant of a fee-for-service system. As a result, most major non-Medicare payers have rejected APCs as a model for outpatient payment reform and a renewed interest in the original APG OPPS design has occurred. This article reviews the basic components of an OPPS, compares and contrasts an APG- and APC-based OPPS, describes the differences between APG, Version 2.0, and APG, Version 3.0, and summarizes the key policy decisions payers will need to make in implementing an OPPS.