Estimation of Standardized Hospital. Costs from Claims Data that Reflect Resource Requirements for Care
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1 Estimation of Standardized Hospital 1 Costs from Claims Data that Reflect Resource Requirements for Care JOHN T. SCHOUSBOE, MD, PHD 1,2 MISTI L. PAUDEL MPH 3 BRENT C. TAYLOR, PHD, MPH 3,4 LIH-WEN MAH, PHD, MPH 5 BETH A. VIRNIG, PHD, MPH 2 KRISTINE E. ENSRUD, MD, MPH 3,4,6 BRYAN E. DOWD, PHD 2 1 PARK NICOLLET INSTITUTE FOR RESEARCH & EDUCATION 2 DIVISION OF HEALTH POLICY AND MANAGEMENT, UNIVERSITY OF MINNESOTA 3 DIVISION OF EPIDEMIOLOGY, UNIVERSITY OF MINNESOTA 4 CHRONIC DISEASE OUTCOMES RESEARCH, MINNEAPOLIS VAMC 5 CHRONIC DISEASE RESEARCH GROUP, MINNEAPOLIS, MN 6 DEPARTMENT OF MEDICINE, UNIVERSITY OF MINNESOTA
2 Disclosures 2 None
3 Agenda 3 Demonstrate a DRG-weight based method to estimate standardized costs of hospital care for prospective cohort studies linked to Medicare claims Describe rationale for DRG-weight based method Compare Medicare payments to hospital providers with standardized cost estimates of patient care 795 participants in Study of Osteoporotic Fractures (SOF) who had a hip fracture 1/1/1992 through 12/31/2009 Is this method applicable for cost studies across different hospital providers (e.g., HMORN members)?
4 Background 4 $0 $50,000 $100,000 $150,000 Total Costs One Year Post Hip Fracture Variation in Health Care Costs is only partially explained Cost Predictors Health care system structure Socioeconomic milieu Individual characteristics Prospective cohort studies merged w/ Medicare Claims Data to study individual predictors of health care costs Patient self-report health status & other variables Mental status Physical performance capability Biomarkers
5 True Resource Estimates Required 5 for Care Medicare payments to providers often used to estimate costs of care Medicare strives to base reimbursement on true resource costs required to care Hospital cost reports provide detailed resource utilization to Medicare Detailed data on local labor and capital costs Under Prospective Payment System, standard base payment for hospital stays established each fiscal year Diagnosis Related Group (DRG) weights are assigned based on; Constellation of patient discharge diagnoses & procedures required during hospital stay Relative resource costs required based on patient medical and surgical acuity
6 Challenges of Using Medicare to Estimate Resource Costs for Cohort-Claims linked Data Medicare payments are adjusted for geographic variation in labor and capital input prices Cohort studies recruit from limited geographic regions of the United States How do we generalize to the entire country? Medicare pays extra to hospitals for; Passthru payments for direct medical education and bad debts Additional teaching responsibilities (Indirect Medical Education, IME) With higher proportion of indigent patients (Disproportionate Share Payments, DSH) These may not be relevant to estimated associations of individual characteristics with true resource costs required for inpatient care 6
7 Challenges of Using Medicare to Estimate Resource Costs for Cohort-Claims linked Data Cohort studies follow patients over many years DRG codes change over time Payment policies change over time Cost inflation Some hospitals not paid according to Prospective Payment System Hospitals in State of Maryland Critical access hospitals How do we make cost estimates for non-pps stays comparable to cost estimates for PPS stays? Need to account for outlier stays Extra long outlier stays due to circumstances not captured in the DRG weight Extra short stays where patient is transferred to another hospital or skilled nursing facility 7
8 Medicare Hospital Payment & 8 Proposed DRG-Weight Based Method: Payments to Providers Under Prospective Payment System (PPS) Standard_Amount GEO_ADJUSTED *DRG WEIGHT + outlier payment + IME + DSH + Passthru Standardized Payments Standard Amount UNADJUSTED *DRG WEIGHT + outlier payment
9 Proposed Method: Standardized 9 Costs for Extra Short Stays + Transfer to another Facility Daily_amount UNADJUSTED = Standard_Amount UNADJUSTED *DRG WEIGHT /Geo_Mean_LOS Total standardized cost of extra short stay plus transfer to another facility = 2*Daily_amount UNADJUSTED + (LOS-1)*Daily_amount UNADJUSTED + outlier payment
10 Research Question 10 How do Standardized Costs compare to cost estimates based solely on MedPAR payment variables? Is the rank order of inpatient costs the same for standardized costs as for cost estimates based on MedPAR? Each hospital stay as unit of analysis Total inpatient costs for one year after hip fracture with individual as unit of analysis Study population: 795 individuals who had 1,397 hospitalizations for one year following hip fracture Incident hip fracture (hospital discharge diagnosis of 820.0x or ) Enrollment in Medicare Fee for Service Part A for 1 year after hip fracture (or until death)
11 Merged Dataset: Study of Osteoporotic Fractures and Medicare Claims 11 9,704 women recruited at four geographic sites in the United States Study visits every 2 to 4 years for active surviving participants through 2006 to 2008 Medicare claims successfully matched for 92% of participants surviving and still enrolled in the cohort as of 1/1/1991
12 Methods Cost estimates based on MedPAR Payment variables Medicare hospital payment (includes IME, DSH, passthru, outliers adjustments) Deductible and co-insurance amounts Standard cost estimates DRG weights & geometric mean length of stay (LOS) for each DRG for each year from Medicare tables on CMS website Standard base hospital payment amounts for each fiscal year (Standard_amount UNADJUSTED ) from Federal Register From MedPAR: DRG assigned to hospital stay Outlier payments LOS for each hospitalization Discharge to another facility 12
13 Results: Number Admissions Year After 13 Proportion of SOF Participnts with Hip Fracture* Number of Hospital Admissions Year after Hip Fracture^ Hip Fracture ^ Includes acute hospital stay to surgically treat hip fracture
14 Characteristic State of Hospital Stay: Maryland Pennsylvania Minnesota Florida Oregon Other* Paid Under Prospective Payment System (n=845) & 0 (0%) 456 (53.8%) 191 (22.5%) 38 (4.5%) 30 (3.5%) 133 (15.7%) NOT Paid Under Prospective Payment System (n=552) & 541 (97.3%) 6 (1.1%) 7 (1.3%) 1 (0.2) 0 (0.0%) 1 (0.2%) Number (%) with IME payments 338 (39.9%) 0 (0%) Number (%) with DSH payments 328 (38.7%) 0 (0%) Number (%) w/ Outlier payments 9 (1.1%) 0 (0%) Number (%) with Pass Thru payments 622 (73.3%) 2 (0.4%) Proportion with Extra Short Stay^ & Transfer to 206 (24.3%) 134 (24.1%) Another Facility^^ Estimated Cost (SD), MedPAR Payment $10,414 (5,674) $12,623 (8,099) Variables Estimated Cost (SD), DRG weight based $9,403 (4,945) $8,903 (3,685) 14
15 Standard Cost Estimates vs. Costs Based on MedPAR Payment Variables 15 Panel A: 845 Stays Paid Under PPS Panel B: All 1,397 Hospitql Stays Cost Calculated from MedPAR Cost Variables* $100,000 $80,000 $60,000 $40,000 $20,000 $0 $0 $20,000 $40,000 $60,000 $80,000 $100,000 Costs Calculated from Standard Base Amounts & DRG Weights* Cost Calculated from MedPAR Cost Variables* $100,000 $80,000 $60,000 $40,000 $20,000 $0 $0 $20,000 $40,000 $60,000 $80,000 $100,000 Cost Calculated from Standard Base Amounts & DRG Weights* *2010 U.S. Dollars Source of Hospital Stay Cost Estimates MedPAR Payment Variables Standard Base Amounts & DRG Weights *2010 U.S. Dollars Source of Hospital Stay Cost Estimates MedPAR Payment Variables Standard Base Amounts & DRG Weights **Spearman Rank Correlation 0.85 Spearman Rank Correlation 0.71** Spearman Correlation: 0.85 Spearman Correlation: 0.71
16 Change of Quintile Using Standardized Costs vs. MedPAR Payment Variables 16 Panel A: 1,397 Hospital Stays Panel B: Costs over 1 year (795 women ) 50% 50% Percentage of Acute Hospital Stays 40% 30% 20% 10% Percent of 795 Persons with Hip Fracture 40% 30% 20% 10% 0% Change of Quintile with Standardized Costs vs. MedPAR Payment 0% Change of Quintile Using Standardized Costs vs. MedPAR Payment over 1 Year
17 Can DRG-weight based method be applied outside Medicare? 17 Can make costs across different Hospital providers comparable Different payment polices among health care insurers Different payment contracts between specific insurers and hospital providers HMORN providers Are hospital costing methods the same across the network?
18 Limitations of DRG-weight based method & this study 18 Method is NOT appropriate where local geographic and hospital characteristics are relevant to the research question DRG weight based method depends on DRG weights to fully capture individual differences in resource intensity need to care for that individual DRG codes were substantially expanded in 2007 to better capture diagnoses, procedures, and health status that drive required resources for care DRGs prior to 2008 do not fully capture that variation Our analyses limited to hospital costs after hip fracture (included 182 separate DRGs) Further studies across entire breadth of DRGs, and among those younger than age 65 years are needed
19 Conclusions DRG weight based method can be used to estimate acute hospital costs Reflect resources required for care based on patient medical and surgical acuity Applicable to all hospital stays, regardless of hospital characteristics or whether or not Medicare payment was based on Prospective Payment System Data required from MedPAR (or other inpatient claims file) DRG assigned to hospital stay Length of hospital stay, whether or not patient was transferred to another facility Outlier payments based on medical & surgical acuity Additional Required data (available from author upon request) DRG weight and geometric mean length of stay tables Standard base payment amounts for fiscal year in which hospital stay took place 19 Full Reference: Schousboe JT et. al., Health Services Research 2014 (online): DOI: /
20 Acknowledgments 20 Main grant: 1 R01 AG A1 (Predictors of Health Care Utilization and Costs Attributable To Hip Fracture), National Institute on Aging The Study of Osteoporotic Fractures (SOF) is supported by National Institutes of Health funding. The National Institute on Aging (NIA) provides support under the following grant numbers: R01 AG005407, R01 AR35582, R01 AR35583, R01 AR35584, R01 AG005394, R01 AG027574, and R01 AG027576
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