One DRG, one price? The effect of patient condition on price variation within DRGs and across hospitals

The effectiveness of the neonatal diagnosis-related group scheme

The goal of this study is to investigate the effectiveness of the neonatal diagnosis-related group scheme in patients affected by respiratory distress syndrome. The variable costs of individual patients in the same group are examined. This study uses the data of infants (N = 243) hospitalized in the Neonatal Intensive Care Unit of the Gaslini Children's Hospital in Italy in 2016. The care unit's operating and management costs are employed to estimate the average cost per patient. Operating costs include those related to personnel, drugs, medical supplies, treatment tools, examinations, radiology, and laboratory services. Management costs relate to administration, maintenance, and depreciation cost of medical equipment. Cluster analysis and Tobit regression are employed, allowing for the assessment of the total cost per patient per day taking into account the main cost determinants: birth weight, gestational age, and discharge status. The findings highlight great variability in the costs for patients in the same diagnosis-related group, ranging from a minimum of €267 to a maximum of €265,669. This suggests the inefficiency of the diagnosis-related group system. Patients with very low birth weight incurred costs approximately twice the reimbursement set by the policy; a loss of €36,420 is estimated for every surviving baby with a birth weight lower than 1,170 grams. On the contrary, at term, newborns cost about €20,000 less than the diagnosis-related group reimbursement. The actual system benefits hospitals that mainly treat term infants with respiratory distress syndrome and penalizes hospitals taking care of very low birth weight patients. As a result, strategic behavior and "up-coding" might occur. We conduct a cluster analysis that suggests a birth weight adjustment to determine new fees that would be fairer than the current costs.

Do Capitation-based Reimbursement Systems Underfund Tertiary Healthcare Providers? Evidence from New Zealand

One of the main concerns about capitation-based reimbursement systems is that tertiary institutions may be underfunded due to insufficient reimbursements of more complicated cases. We test this hypothesis with a data set from New Zealand that, in 2003, introduced a capitation system where public healthcare provider funding is primarily based on the characteristics of the regional population. Investigating the funding for all cases from 2003 to 2011, we find evidence that tertiary providers are at a disadvantage compared with secondary providers. The reasons are that tertiary providers not only attract the most complicated, but also the highest number of cases. Our findings suggest that accurate risk adjustment is crucial to the success of a capitation-based reimbursement system. Copyright © 2017 John Wiley & Sons, Ltd.

Analysis of variation in charges and prices paid for vaginal and caesarean section births: a cross-sectional study

OBJECTIVE

To examine the between-hospital variation of charges and discounted prices for uncomplicated vaginal and caesarean section deliveries, and to determine the institutional and market-level characteristics that influence adjusted charges.

DESIGN, SETTING AND PARTICIPANTS

Using data from the California Office of Statewide Health Planning and Development (OSHPD), we conducted a cross-sectional study of all privately insured patients admitted to California hospitals in 2011 for uncomplicated vaginal delivery (diagnosis-related group (DRG) 775) or uncomplicated caesarean section (DRG 766).

OUTCOME MEASURES

Hospital charges and discounted prices adjusted for each patient's clinical and demographic characteristics.

RESULTS

We analysed 76 766 vaginal deliveries and 32 660 caesarean sections in California in 2011. After adjusting for patient demographic and clinical characteristics, we found that the average California woman could be charged as little as US$3296 or as much as US$37 227 for a vaginal delivery, and US$8312-US$70 908 for a caesarean section depending on which hospital she was admitted to. The discounted prices were, on an average, 37% of the charges. We found that hospitals in markets with middling competition had significantly lower adjusted charges for vaginal deliveries, while hospitals with higher wage indices and casemixes, as well as for-profit hospitals, had higher adjusted charges. Hospitals in markets with higher uninsurance rates charged significantly less for caesarean sections, while for-profit hospitals and hospitals with higher wage indices charged more. However, the institutional and market-level factors included in our models explained only 35-36% of the between-hospital variation in charges.

CONCLUSIONS

These results indicate that charges and discounted prices for two common, relatively homogeneous diagnosis groups-uncomplicated vaginal delivery and caesarean section-vary widely between hospitals and are not well explained by observable patient or hospital characteristics.

Defining care products to finance health care in the Netherlands

A case-mix project started in the Netherlands with the primary goal to define a complete set of health care products for hospitals. The definition of the product structure was completed 4 years later. The results are currently being used for billing purposes. This paper focuses on the methodology and techniques that were developed and applied in order to define the casemix product structure. The central research question was how to develop a manageable product structure, i.e., a limited set of hospital products, with acceptable cost homogeneity. For this purpose, a data warehouse with approximately 1.5 million patient records from 27 hospitals was build up over a period of 3 years. The data associated with each patient consist of a large number of a priori independent parameters describing the resource utilization in different stages of the treatment process, e.g., activities in the operating theatre, the lab and the radiology department. Because of the complexity of the database, it was necessary to apply advanced data analysis techniques. The full analyses process that starts from the database and ends up with a product definition consists of four basic analyses steps. Each of these steps has revealed interesting insights. This paper describes each step in some detail and presents the major results of each step. The result consists of 687 product groups for 24 medical specialties used for billing purposes.

The impact of research on hospital costs of care: an empirical study

The goal of this study was to examine the impact of research activities on hospital costs and lengths of stay in French public hospitals. Our data consist of a random sample of 30000 inpatient stays in 38 hospitals that were extracted from the French Hospital Cost Survey database. Hospital characteristics were added using data from a French national survey and performing a bibliometric study. This is a retrospective study of hospitalizations. We used multilevel modelling. We considered separate models to explain the cost per day and the length of hospital stay (LOS). Research output was defined based on the quartiles of the distribution of the number of impact-weighted scientific publications produced in our sample of hospitals over a 6-year period. Research production was associated with a higher cost of care. The cost per day was 19% higher in hospitals in the 3rd quartile and 42% higher in hospitals in the 4th quartile compared to that in hospitals that were not involved in research activities. This result was sensitive to the type of care under consideration. The effect was stronger in oncology but not significant in routine care. Scientific production did not impact the LOS.

The profitability of Medicare admissions based on source of admission

OBJECTIVES

This study investigates whether admissions from the emergency department (ED) have lower dollar margins than elective admissions under Medicare and explores two possible reasons for differences in margins.

METHODS

The authors developed patient-level Medicare dollar margins (calculated as patient revenue minus cost) for 1,159,243 Medicare admissions from 321 hospitals using data from the 2003 Nationwide Inpatient Sample (NIS) and the Medicare Impact File. Differences in margins between ED and elective admissions were explored across a number of diagnosis-related groups (DRGs) using t-tests. Chi-square tests were used explore whether ED admission was more common among patients in low-profit DRGs and/or patients with greater severity of illness.

RESULTS

The average Medicare dollar margins were -$712 (95% confidence interval [CI] = -$729 to -$695) for ED admissions and $22 (95% CI = -$2 to $47) for elective admissions. Medicare dollar margins for ED admissions were lower than those of elective admission for the most common DRGs. ED admission was associated with greater patient severity of illness.

CONCLUSIONS

Source of admission is a financially meaningful classification. Because Medicare payment policy does not recognize differences in cost based on patients' route of admission, hospitals may have a financial incentive to favor elective admissions over ED admissions.

Do hospitals with electronic medical records (EMRs) provide higher quality care?: an examination of three clinical conditions

This study investigates how hospital electronic medical record (EMR) use influences quality performance. Data include nonfederal acute care hospitals in the United States. Sources of the data include the American Hospital Association, Hospital Quality Alliance, the Healthcare Information and Management Systems Society, and the Centers for Medicare and Medicaid Services case-mix index sets. The authors use a retrospective cross-sectional format with linear regression to assess the relationship between hospital EMR use and quality performance. Quality performance is measured using 10 process indicators related to 3 clinical conditions: acute myocardial infarction, congestive heart failure, and pneumonia. The authors also use a propensity score adjustment to control for possible selection bias. After this adjustment, the authors identify a positive significant relationship between EMR use and 4 of the 10 quality indicators. They conclude that there is limited evidence of the relationship between hospital EMR use and quality.

Coding response to a case-mix measurement system based on multiple diagnoses

OBJECTIVE

To examine the hospital coding response to a payment model using a case-mix measurement system based on multiple diagnoses and the resulting impact on a hospital cost model.

DATA SOURCES

Financial, clinical, and supplementary data for all Ontario short stay hospitals from years 1997 to 2002.

STUDY DESIGN

Disaggregated trends in hospital case-mix growth are examined for five years following the adoption of an inpatient classification system making extensive use of combinations of secondary diagnoses. Hospital case mix is decomposed into base and complexity components. The longitudinal effects of coding variation on a standard hospital payment model are examined in terms of payment accuracy and impact on adjustment factors.

PRINCIPAL FINDINGS

Introduction of the refined case-mix system provided incentives for hospitals to increase reporting of secondary diagnoses and resulted in growth in highest complexity cases that were not matched by increased resource use over time. Despite a pronounced coding response on the part of hospitals, the increase in measured complexity and case mix did not reduce the unexplained variation in hospital unit cost nor did it reduce the reliance on the teaching adjustment factor, a potential proxy for case mix. The main implication was changes in the size and distribution of predicted hospital operating costs.

CONCLUSIONS

Jurisdictions introducing extensive refinements to standard diagnostic related group (DRG)-type payment systems should consider the effects of induced changes to hospital coding practices. Assessing model performance should include analysis of the robustness of classification systems to hospital-level variation in coding practices. Unanticipated coding effects imply that case-mix models hypothesized to perform well ex ante may not meet expectations ex post.