3M Patient-focused Episodes (PFE) Software

Quantify patient needs and generate actionable insights that can help lower costs and improve outcomes.

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Identify patient-focused episodes using a clinical model that categorizes episodes of care to reflect a patient’s total burden of illness, not merely the presence of a single diagnosis.

3M PFEs are patient-centered and help identify the majority of health care spending.

The 3M™ Patient-focused Episodes (PFE) Software generates extensive risk adjustment using widely adopted methodologies for inpatient hospital care, ambulatory care and baseline health status.

doctor and businessman having a discussion
3M PFEs: Patient-centered, clinically categorizes and defines episodes of care

3M PFEs identify the health care data that can help an organization gain insights into reducing costs and improving outcomes.


Why choose the 3M™ Patient-focused Episodes (PFE) Software?

  • a doctor talking to a patient in a hospital bed
    Patient-centric, not disease-specific

    In contrast to approaches that define episodes by disease with minimal recognition of the complex interplay of comorbidities, 3M PFEs are patient-centered. An episode includes all costs of caring for the patient during the episode. This is important because patients with comorbidities account for most health care spending.

  • doctor writing on a clipboard
    Careful, clinically defined risk adjustment

    To reflect the clinical reality that resource needs vary widely depending on comorbidities, 3M PFEs include extensive risk adjustment using widely adopted and well vetted methodologies such as the 3M™ All Patient Refined Diagnosis Related Groups (3M APR DRGs) for inpatient hospital care, the 3M™ Enhanced Ambulatory Patient Groups (EAPGs) for ambulatory care, and the 3M™ Clinical Risk Groups (CRGs) for baseline health status.

  • surgeon typing on a laptop

    In Version 2.0, the 3M PFE methodology includes 330 event-based episodes covering a full range of medical and procedural encounters in both the inpatient and ambulatory settings. In addition, 123 cohort episodes cover a wide range of chronic conditions and pregnancy-related care.

  • patient filling out information at a clinic front desk
    Flexible and suitable for payment

    3M PFEs were designed not only for analysis but also as the unit of payment. 3M PFE users have wide latitude to define the length of the episode window, included and excluded services, and how special situations such as outliers and truncated episodes are handled. Because 3M PFEs are a clinical, categorical model, clinicians and analysts can drill into the data to gain insights on how to reduce cost and improve outcomes.

All about 3M PFEs

The 3M PFE Software uses a categorical, clinical model to classify patients into mutually exclusive categories, creating a uniform clinical language that can help identify at-risk patients, cost and inefficiencies.

  • Definition
    3M PFEs are a categorical, clinical model that defines episodes of care to reflect a patient’s total burden of illness, not merely the presence of a single disease. 3M PFEs simultaneously quantify the patient’s acute and post-acute resource needs, taking into account both the immediate need for care and baseline health status. The methodology was designed for purposes of payment, utilization analysis and clinical insight.
  • 3M PFEs are most attractive to organizations interested in improving system-wide health care performance, provider profiling and payment reform. Examples include large integrated delivery systems, payers, accountable care organizations, government agencies, employers and research groups.

    The 3M PFE Software is designed both for analysis and for creating a bundled, incentive-based payment method. Because the 3M PFE-based payment method includes risk adjustment, it can reward provider collaboration and efficiency without requiring providers to accept insurance risk for the incidence of illness and injury. Many payers, led by Medicare, look to episodes and other alternative payment methods to reduce waste, increase coordination and improve outcomes.

  • Here are a few examples of the value 3M PFEs can bring to customers:

    • Meaningful communication to improve patient outcomes. To improve care, clinicians need data they can believe. 3M PFEs are defined in clinical terms that communicate actionable information at a sufficient level of detail. High-level analysis reveals variations and areas for potential improvement, so that the categorical nature of 3M PFE results can then lead to focused actions.
    • Bundled payment. The 3M PFE patient-centered approach greatly simplifies the administration of an episode-based payment method. It eliminates the complexity of defining which services are related to which diagnoses. This is especially important when patients have multiple diagnoses. The entity receiving the single payment is rewarded for efficiently coordinating both acute and post-acute care across multiple provider types. 3M PFEs include severity and risk adjustment, outlier thresholds, empirically defined relative payment weights and other features needed for a successful prospective payment system.
    • Stewardship of financial resources. The 3M PFE Software clearly defines the episode as the comprehensive unit of service. The ability to compare actual and expected resource use (included in the 3M software) can identify patterns of systematic overuse and underuse. These results serve as a starting place for further identification of possible inappropriate care, fraud, waste and abuse. For example, if a hospital’s patients have meaningfully higher post-acute care expenses compared with peer organizations, the reason may be inadequacies in inpatient care or continuity of care.
  • 3M PFE classification logic is the same for every licensee, although different organizations may use different configurations. At this time, 3M does not offer software that replicates the PFE analysis used by specific organizations. See the list of reimbursement calculation software available for 3M patient classification methodologies.

  • 3M PFEs use 3M APR DRGs as triggers for inpatient event episodes, 3M EAPGs as triggers for outpatient event episodes, and 3M CRGs both to identify cohort episodes and risk adjust all episodes for baseline health status. Readmissions are evaluated using the 3M™ Potentially Preventable Readmissions (PPR) Grouping Software. Licensees already familiar with 3M patient classification methodologies will easily recognize and understand many 3M PFE concepts.
  • 3M PFEs are available in the following 3M products:

    Available to licensees on the 3M customer support website:

    • 3M PFE Methodology Overview
    • 3M PFE Definitions Manual
    • 3M PFE Summary of Changes
    • 3M PFE Setup Guides
  • 3M experts are available to advise health plans, government agencies, providers and other organizations on how to obtain maximum value from the 3M PFEs. Because 3M PFEs are a powerful and complex methodology, consulting services are recommended to first-time users for initial implementation, evaluation, analysis and interpretation of results.

    3M consultants can also help payers and other organizations measure performance and identify material variation across health plans, providers and other patient populations; design pay-for-outcomes incentive methods; facilitate learning collaboratives; and provide advice on documentation and coding.

  • All data required to assign a 3M PFE are routinely collected from institutional and professional claims, including the UB-04 and CMS-1500 paper forms and their corresponding X12N 837 electronic formats. Pharmacy data in NCPDP format are optional but recommended.  Consistent, unique patient identifiers are essential. These requirements are the same as those for the 3M CRGs.

    3M PFE analysis typically involves creation of a static data set comprising at least one full year of data. Two years of data allow a full year of data to establish baseline health status by 3M CRG before a one-year episode analysis window. Some users perform rolling analyses each month or each quarter. The 3M PFEs do not need to be built into a claim-processing system.

  • Development

    In the 1980s and 1990s, the success of the Centers for Medicare & Medicaid Services (CMS) Diagnosis Related Groups (DRGs) for hospital inpatient care prompted widespread interest in developing similar models for other applications. Since CMS DRGs define an episode as a single hospital stay, the obvious extension was to define broader episodes. For example, an episode might also include the cost of physician services and post-acute services such as rehabilitation.

    3M Health Information Systems, as the contractor to CMS for Medicare DRGs, was well-positioned to develop such models. Under contract to CMS and the Medicare Payment Advisory Commission (MedPAC), 3M prepared analyses of episodes built around Medicare DRGs that were published in 2013 in the Medicare and Medicaid Research Review¹ and in a MedPAC Report to Congress.²

    In parallel to its work developing episodes around Medicare DRGs, 3M also developed the more comprehensive, proprietary 3M™ Patient-focused Episode (PFE) Software. 3M Patient-focused Episodes (PFEs) are appropriate for all populations, include both inpatient and ambulatory care and incorporate risk adjustment for baseline health status.

    Design principles

    These six principles guided 3M PFE design:

    1. Patient-focused. Most notably, the episode clinical model focuses on an individual’s total burden of illness. This approach differs from conventional disease-centered models that face the intractable challenge of separating services; for example, heart failure requires treatment and services distinct from those needed for lung disease. This is important because patients with interacting comorbidities are precisely those who are most expensive to care for and the most complex clinically.
    2. Uniform categorical clinical model. 3M PFEs are a categorical clinical model, that is, a mutually exclusive and exhaustive set of clinical categories that differentiate individuals based on their total burden of illness. The underlying categorical model applies to all episode types, creating a uniform and stable clinical language. The model also remains unchanged across all potential configurations of episodes (window lengths, included services, etc.).
    3. Re-use well-established systems. 3M PFEs are based on the 3M™ APR DRGs, 3M™ EAPGs, and 3M™ CRGs, which are widely used for risk adjustment and payment systems.
    4. Independent relative weights. For each potential configuration of episodes, a separate set of relative weights is computed. Despite differences in configuration, relative weights reflect a stable clinical model, enabling a consistent clinical language.
    5. Empirical relative weights. The relative weights are empirically derived, reflecting actual spending for the care typically delivered during an episode.
    6. Outlier identification specific to the patient's condition. Episodes include outlier thresholds to identify individual cases where cost substantially exceeds the expected level.


    For profiling comparisons or establishing payment levels, an episode methodology must calculate both actual and expected resource use by episode. In setting up a 3M PFE analysis, users have broad flexibility in defining the time windows for episode identification and the 3M Clinical Risk Group (CRG) assignment; determining which services are included and excluded; defining the readmission logic; and handling outliers and truncated episodes.

    3M PFE software performs three functions:

    1. Episode classification: Based on the patient’s claims history, each patient is assigned to event-based and/or cohort-based episodes. Event-based episodes start when a significant health care event occurs; a patient may be in only one event-based episode at a time. Cohort episodes are assigned to patients who share a common disease, condition or characteristic within a given time period. A patient may be in more than one cohort episode at the same time. Neither episode type attempts to isolate the services associated with any specific condition, but instead capture the patient’s entire resource needs during the episode. The patient’s baseline health status is considered by cross-tabulating episodes by the patient’s Aggregated Clinical Risk Group (ACRG).
    2. Episode accumulator: Based on the time window selected and the service categories included, actual expenditures are accumulated for each episode.
    3. Episode estimator: Based on the same episode settings, relative weights are computed for each episode. These relative weights measure the relative costliness of the patient’s care compared with the costs for all other patients.

    Analysts can use the 3M PFE results to compare resource utilization and spending across plans, providers or other populations. Consider a health plan with average spending of $40,000 per capita for patients in 3M PFE 1622 Aortic Valve Procedures with baseline health status ACRG 72 (diseases in three or more organ systems, severity 2). If the benchmark spending figure for PFE 1622/ACRG 72 is $50,000 per capita, then actual spending is 20 percent less than expected. Note how the use of ACRGs reflects the clinical reality that patients undergoing the same treatment can and do vary widely in their total resource use. A group of sicker patients in PFE 1622/ACRG 74 (i.e., severity 4) would typically have higher expected spending (e.g., $60,000 per capita). 3M PFEs enable fair comparisons of spending and resource utilization.

    After analysis, an obvious next step is to establish a payment method based on 3M PFEs; for example, a payment method can have prospective rates of $50,000 per capita for 3M PFE 1622/ACRG 72 and $60,000 per capita for 3M PFE 1622/ACRG 74. The 3M PFE methodology facilitates design of a prospective payment method by defining bundled services, calculating relative weights and identifying outliers.

    The 3M PFE clinical logic is maintained by a team of clinicians, data analysts, clinical analysts, programmers and economists. The logic is proprietary to 3M but is available for licensees to view in the online 3M PFE Definitions Manual. The methodology is updated annually to reflect changes in the standard diagnosis and procedure code sets and is regularly enhanced to improve the clinical logic.

    Examples of 3M PFEs

    Event-based episodes:

    • Inpatient Surgical Event (n = 120)
      1622 Aortic Valve Procedures
    • Inpatient Medical Event (n = 127)
      1381 Bronchiolitis & RSV Pneumonia
    • Outpatient Procedure Event (n = 74)
      0470 Level II Arthroplasty
    • Outpatient Medical Event (n = 9)
      1454 Status Asthmaticus

    Cohort episodes:

    • Chronic Cohort (n = 93)
      0020 Parkinson’s Disease
    • Acute Cohort (n = 23)
      0420 Cerebrovascular Infarction
    • Pregnancy Cohort (n = 6)
      5401 High Risk Pregnancy w Delivery
    • Population Cohort (n = 1)

    ¹Vertrees J, Averill R, Eisenhandler, J, Quain, A, Switalski J. Bundling Post-Acute Care Services into MS-DRG Payments. Medicare Medicaid Res Rev. 2013;3(3):E1-E19
    ²Medicare Payment Advisory Commission. Approaches to bundling payment for post-acute care. Chapter 3 in Report to the Congress: Medicare and the Health Care System. Washington, DC: MedPAC, June 2013.

Learn more about 3M PFEs

Publicly available documentation, articles and reports

Please note that documents not published by 3M do not necessarily reflect 3M recommendations and have not been approved by 3M. These documents are listed here for the information of readers interested in the various ways that 3M patient classification methodologies have been applied. Also note that listing these references does not imply endorsement of 3M methodologies by individual authors, other organizations or government agencies.

Some articles and reports are available from the publishers at no charge, while others require a fee.

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