3M HIS methodologies help state Medicaid programs across the U.S.

July 15, 2022 / By Gregg Perfetto, Clark Cameron

Explaining what we do for 3M isn’t always easy. Truth is, for most 3Mers, the minute you tell someone that you work for 3M, they ask you if you make the Post-It® Note, sandpaper, Scotch® Tape or another well-known 3M consumer product. It takes a while to talk through where 3M Health Information Systems (HIS) fits into the bigger 3M picture (after the requisite “Romy and Michelle” movie reference, of course) – but it is worth it.   

While 3M HIS may not be as well known as Scotch Tape, our methodologies and software are used across the globe by numerous government agencies and commercial payers (Table 2) to make health care more efficient and effective for the patients it serves. 

For example, each year since 2004, state Medicaid agencies have chosen the 3M All Patient Refined Diagnosis Groups (APR DRGs) to help manage inpatient hospital payment programs. Today, a majority of state Medicaids apply APR DRGs to classify claims based on the patient’s severity of illness (SOI) and risk of mortality (ROM), which helps the agencies remit payment to the providers appropriately based on resource utilization rather than volume. Doing this ensures that providers treating more severely ill patients are appropriately reimbursed for those services in a budget neutral manner.   

Health care costs continue to significantly rise year after year, yet Medicaid budgets do not. The ability for a Medicaid agency to prospectively identify resource utilization by providers treating Medicaid patients helps them manage the limited dollars they have to pay out to providers.  

A developing health care trend over the past decade has been the migration of some services from inpatient to outpatient or ambulatory settings, requiring Medicaid agencies to modify payment approaches. Similar to managing payment for inpatient care, the ability to prospectively pay outpatient and ambulatory claims based on resource utilization helps Medicaid agencies both pay providers equitably and manage the agencies’ limited budgets.  

Lastly, as the shift from health care volume to health care value accelerates, state Medicaid agencies require sophisticated tools to assist in their efforts to adjust payments and report to various state and federal regulatory agencies. 3M methodologies like 3M™ Clinical Risk Groups (CRGs), 3M™ Potentially Preventable Episodes (PPEs) and 3M™ Patient-Focused Episodes (PFEs) have been helpful to more than a dozen Medicaid agencies in their moves toward value-based care. As outlined in Table 1 below, Texas Medicaid has adopted the population health methodologies to support comprehensive value-based initiatives related to both hospital payments and managed care quality payment and oversight.  

While our family and friends may not readily know what we do each day, health policy and program leaders across the country know the power of the 3M methodologies (as shown in Table 2 below). They have been using them for many years, they are tested by large and small states as well, as the providers and plans in those states. In sum, we are always happy to tell our friends that 3M HIS builds and maintains the most valuable risk-adjustment tools in the health care industry, covering inpatient, outpatient and population health.  

Table 1:  

Programs and tools that support comprehensive value-based care in Texas Medicaid  

Efficient hospital payments
3M classification tools are used throughout the Texas Medicaid program. 3M All Patient Refined Diagnosis Groups (APR DRGs) enable fair and clinically-based hospital inpatient payment. 3M™ Enhanced Ambulatory Patient Groups (EAPGs) will soon support outpatient hospital payments.

Hospital value-based payment program
Hospitals have portions of their inpatient payments link to risk-adjusted performance on 3M™ Potentially Preventable Readmissions (PPRs) and 3M™ Potentially Preventable Complications (PPCs).

Health plan value-based incentive programs:
Three percent of health plans capitated payments are “at-risk,” contingent on performance. 3M™ Potentially Preventable Emergency Department Visits (PPVs), 3M™ Potentially Preventable Admissions (PPAs), as well as a 3M PPRs are key risk-adjusted measures in this program. In addition to holding health plan capitation at-risk, Texas Medicaid uses these same measures to calculate each health plan’s default enrollment allocation.

Provider value-based payment requirements: Health plans are contractually required to implement, support and report value-based contracting activity with network providers to Texas Medicaid.

Public reporting: Promotes transparency and accountability.



Table 2: 






3M Potentially Preventable Admissions (PPAs) 



Per capital admissions in a population 

3M Potentially Preventable Emergency Department Visits (PPVs) 



Per capital emergency department visits in a population 

3M Potentially Preventable Readmissions (PPRs) 



Identification of readmissions following hospital discharge 

3M™ Potentially Preventable Return Emergency Department Visits (PPR-EDs) 



Identification of ED visits following hospital discharge 

3M Potentially Preventable Complications (PPCs) 



Identification of complications for inpatient stays 

Risk adjustment 

3M All Patient Refined Diagnosis Related Groups (APR DRGs) 



Inpatient risk adjustment 

3M Clinical Risk Groups (CRGs) 



Population risk adjustment 


Gregg Perfetto is a payer account manager for the regulatory and government affairs team at 3M Health Information Systems. 

Clark Cameron is manager of payer market strategy and development for 3M Health Information Systems.