Comparison of statistical and machine learning models for healthcare cost data: A simulation study motivated by Oncology Care Model (OCM) data

Background: The Oncology Care Model (OCM) was developed as a payment model to encourage participating practices to provide better-quality care for cancer patients at a lower cost. The risk-adjustment model used in OCM is a Gamma generalized linear model (Gamma GLM) with log-link. The predicted value of expense for the episodes identified for our academic medical center (AMC), based on the model fitted to the national data, did not correlate well with our observed expense. This motivated us to fit the Gamma GLM to our AMC data and compare it with two other flexible modeling methods: Random Forest (RF) and Partially Linear Additive Quantile Regression (PLAQR). We also performed a simulation study to assess comparative performance of these methods and examined the impact of non-linearity and interaction effects, two understudied aspects in the field of cost prediction. Methods: The simulation was designed with an outcome of cost generated from four distributions: Gamma, Weibull, Log-normal with a heteroscedastic error term, and heavy-tailed. Simulation parameters both similar to and different from OCM data were considered. The performance metrics considered were the root mean square error (RMSE), mean absolute prediction error (MAPE), and cost accuracy (CA). Bootstrap resampling was utilized to estimate the operating characteristics of the performance metrics, which were described by boxplots. Results: RF attained the best performance with lowest RMSE, MAPE, and highest CA for most of the scenarios. When the models were misspecified, their performance was further differentiated. Model performance differed more for non-exponential than exponential outcome distributions. Conclusions: RF outperformed Gamma GLM and PLAQR in predicting overall and top decile costs. RF demonstrated improved prediction under various scenarios common in healthcare cost modeling. Additionally, RF did not require prespecification of outcome distribution, nonlinearity effect, or interaction terms. Therefore, RF appears to be the best tool to predict average cost. However, when the goal is to estimate extreme expenses, e.g., high cost episodes, the accuracy gained by RF versus its computational costs may need to be considered.