The differences between claim-based health risk adjustment models and cost prediction models.

There has been a significant increase in interest in using risk assessment tools with administrative claims data for provider profiling, provider payment, underwriting and disease/case management. The tools can be classified into two types: risk adjustment models and cost prediction models. The differences between the two models have not been well recognized. This paper explains the differences in terms of the objectives, the applications, and the accuracy of evaluations.