Management im Gesundheitswesen DRG Systeme in Europa Reinhard Busse, Prof. Dr. med. MPH FFPH FG Management im Gesundheitswesen, Technische Universität Berlin (WHO Collaborating Centre for Health Systems Research and Management) & European Observatory on Health Systems and Policies 1
Hospital payment systems Why DRGs? Advantages and disadvantages of different forms of hospital payment Transparency Fee-forservice Number of services per case Activity Number of cases Expenditure Control Technical Efficiency Quality Administrative simplicity + + - 0 0-0 Global budget - - + 0 0 + - 2
Hospital payment systems Why DRGs? Advantages and disadvantages of different forms of hospital payment dumping (avoidance), creaming (selection) and skimping (undertreatment) up/wrong-coding, gaming Transparency Fee-forservice DRGbased payment Global budget Number of services per case Activity Number of cases Expenditure Control Technical Efficiency USA 1980s Quality Administrative simplicity + + - 0 0-0 - + 0 + 0 - + - - + 0 0 + - European countries 1990s/2000s 3
Empirical evidence (I): hospital activity and length-of-stay under DRGs USA 1980s Country Study Activity ALoS US, 1983 US Congress - Office of Technology Assessment, 1985 Guterman et al., 1988 Davis and Rhodes, 1988 Kahn et al., 1990 Manton et al., 1993 Muller, 1993 Rosenberg and Browne, 2001 Cf. Table 7.4 in book 4
Empirical evidence (II) European countries 1990/ 2000s Cf. Table 7.4 in book Country Study Activity ALoS Sweden, Anell, 2005 early 1990s Kastberg and Siverbo, 2007 Italy, 1995 Louis et al., 1999 Ettelt et al., 2006 Spain, 1996 Ellis/ Vidal-Fernández, 2007 Norway, Biørn et al., 2003 1997 Kjerstad, 2003 Hagen et al., 2006 Magnussen et al., 2007 Austria, 1997 Theurl and Winner, 2007 Denmark, 2002 Street et al., 2007 Germany, 2003 Böcking et al., 2005 Schreyögg et al., 2005 Hensen et al., 2008 England, 2003/4 Farrar et al., 2007 Audit Commission, 2008 Farrar et al., 2009 France, 2004/5 Or, 2009 5
So then, why DRGs? To get a common currency of hospital activity for transparency efficiency benchmarking & performance measurement (protect/ improve quality), budget allocation (or division among providers), planning of capacities, payment ( efficiency) Exact reasons, expectations and DRG usage differ among countries due to (de)centralisation, one vs. multiple payers, public vs. mixed ownership. 6
Country 1985 1990 1995 2000 2005 2010 Original purpose Principal purpose in 2010 Austria LKF (self-developed) Budgetary allocation Budgetary allocation, Planning England HRG (self-developed) Measuring hospital activity Payment Estonia NordDRG (HCFA-DRG) Payment Payment Finland NordDRG (HCFA-DRG) Measuring hospital activity, benchmarking Planning, benchmarking, hospital billing France GHM (HCFA-DRG) Measuring hospital activity Payment Germany G-DRG (AR-DRG) Payment Payment Ireland HCFA-DRG AR-DRG Budgetary allocation Budgetary allocation Netherlands DBC (self-developed) Payment Payment Poland JGP (HRG) Payment Payment Portugal HCFA-DRG AP-DRG Measuring hospital activity Budgetary allocation Spain (Catalonia) AP-DRG HCFA/CMS-DRG Budgetary allocation Budgetary allocation, benchmarking Sweden NordDRG (HCFA-DRG) Payment Payment, measuring hospital activity, benchmarking 1985 1990 1995 2000 2005 2010 Introduction of DRGs DRG-based hospital payment Notes: the name of the DRG system used in countries is shown in bold, in brackets is the (origin of of a national DRG system); LKF= leistungsorientierte Krankenanstaltenfinanzierung; HRG= Healthcare Resource Groups; NordDRG= common DRG system of the nordic countries; HCFA= Health Care Financing Administration; GHM= Groupes Homogènes de Malade; G-DRG= German-DRG; AR-DRG= Australian Refined-DRG; DBC= Diagnose Behandeling Combinaties; JGP= Jednorodne Grupy Pacjentów; AP-DRG= All Patient-DRG 7
For what types of activities? Scope of DRGs (I) Excluded costs (e.g. forinfrastructure; in U.S. also physicianservices) Payments for non-patient care activities (e.g. teaching, research, emergency availability) Payments for patients not classified into DRG system (e.g. outpatients, day cases, psychiatry, rehabilitation) Additional payments for specific activities for DRGclassified patients(e.g. expensive drugs, innovations), possibly listed in DRG catalogues Other types of payments for DRG-classified patients (e.g. global budgets, fee-for-service) DRG-basedcasepayments, DRG-based budget allocation (possibly adjusted for outliers, quality etc.) 8
For what types of activities? Scope of DRGs (II) DRG system (included in or separate from original DRGs) DRG system (identical or different to original DRGs) Original DRG systems DRG system (included in or separate from original DRGs) DRG system (included in or separate from originaldrgs) Psychiatry Day cases Acute inpatient care Outpatient care Rehabilitation 9
Scope in the Netherlands: DBCs (diagnosis-treatment combinations); examples Inpatient acute care incl. ICU DBC 1 Ambulatory specialist care Hospitalisation DBC 2 Ambulatory specialist care DBC 4 DBC 5 DBC 3 Discharge DBC 6 10
Essential building blocks of DRG systems Data collection 2 Demographic data Clinical data Cost data Sample size, regularity Price setting 3 Actual reimbursement 4 Import Patient classification 1 system Diagnoses Procedures Severity Frequency of revisions Cost weights Base rate(s) Prices/ tariffs Average vs. best Volume limits Outliers High cost cases Quality Innovations Negotiations 11
Choosing a PCS: copied, further developed or self-developed? Patient classification system Diagnoses Procedures Severity Frequency of revisions The great-grandfather The grandfathers The fathers 12
Classification variables and severity levels in European DRG-like PCS Patient classification system Diagnoses Procedures Severity Frequency of revisions AP-DRG AR-DRG G-DRG GHM NordDRG HRG JGP LKF DBC Classification Variables Patient characteristics Age x x x x x x x x - Gender - - - - x - - - - Diagnoses x x x x x x x x x Neoplasms/ Malignancy x x x - - - - - - Body Weight(Newborn) x x x x - - - - - Mental Health Legal Status - x x - - - - - - Medical and management decision variables Admission Type - - - - - x x - - Procedures x x x x x x x x x MechanicalVentilation - - x x - - - - - Discharge Type x x x x x x x - - LOS / Same Day Status - x x x x x x - - Structural characteristics Setting (inpatient, outpatient, ICU etc.) - - - x - - - - x Stay at Specialist Departments - - - - - - - x - Medical Specialty - - - - - - - - x DemandsforCare - - - - - - - - x Severity/ Complexity Levels 3* 4 unlimited 5** 2 3 3 unlimited - Aggregate case complexity measure - PCCL PCCL x - - - - - PCCL = Patient Clinical Complexity level * not explicitly mentioned (Major CCs at MDC level plus 2 levels of severity at DRG level) ** 4 levels 20. of Dezember severity plus 2012 one GHM for short stays or outpatient Krankenversicherung care und Leistungsanbieter 13
PCS: the German approach Patient classification system Diagnoses Procedures Severity Frequency of revisions NB: Three partitions onefornonsurgical procedures! 50% unsplit On average 3 levels (but up to ca. 10) 14
Actual classification differs: appendectomy 15
Basic characteristics of DRG-like PCS in Europe Patient classification system Diagnoses Procedures Severity Frequency of revisions AP-DRG AR-DRG G-DRG GHM NordDRG HRG JGP LKF DBC DRGs / DRG-like groups 679 665 1,200 2,297 794 1,389 518 979 30,000 MDCs / Chapters 25 24 26 28 28 23 16 - - Partitions 2 3 3 4 2 2* 2* 2* - 16
MDC differences across DRG systems Patient classification system Diagnoses Procedures Severity Frequency of revisions 17
Main questions relating to data collection Clinical data classification system for diagnoses and classification system for procedures Data collection Demographic data Clinical data Cost data Sample size, regularity Cost data imported (not good but easy) or collected within country (better but needs standardised cost accounting) Sample size entire patient population or a smaller sample Many countries: clinical data = all patients; cost data = hospital sample with standardised cost accounting system 18
Data collection Diagnosis and procedure coding across Europe Demographic data Clinical data Cost data Sample size, regularity Country Diagnosis Coding Procedure Coding Austria ICD-10-AT Leistungskatalog England ICD-10 OPCS- Office of Population Censuses and Surveys Estonia ICD-10 NCSP- Nomesco Classification of Surgical Procedures Finland ICD-10 NCSP - Nomesco Classification of Surgical Procedures France ICD-10 CCAM - Classification Commune des Actes Médicaux Germany ICD-10-GM OPS - Operationen- und Prozedurenschlüssel Ireland ICD-10-AM ACHI - Australian Classification of Health Interventions The Netherlands ICD-10 Poland ICD-10 ICD-9-CM Portugal ICD-9-CM ICD-9-CM Spain ICD-9-CM ICD-9-CM Elektronische DBC Typeringslijst Sweden ICD-10 NCSP - Nomesco Classification of Surgical Procedures (almost) standardised no uniform standard available 19
Collection of cost data Data collection Demographic data Clinical data Cost data Sample size, regularity Number (share) of cost data collecting hospitals Direct cost allocation to patients Data used for calculationof DRG weights Austria 20 reference hospitals (~8% of all hospitals) grosscosting x England all hospitals top down microcosting x Estonia All hospitals contracted by the NHIF top down microcosting x Finland 5 reference hospitals (~30% of specialised care) bottom up microcosting x France 99 hospitals (~ 13% of mainlytop down inpatient admissions) microcosting x Germany ~250 hospitals mainly bottom up (~ 15% of all hospitals) microcosting x Ireland - - - Poland - - - Portugal - - - The Netherlands unit costs: 15-25 hospitals (~ 24% of all hospitals) bottom up microcosting x Spain - - - Sweden (~ 62% of inpatient admissions) bottom up microcosting x 20
Collection of cost data Data collection Demographic data Clinical data Cost data Sample size, regularity Number (share) of cost data collecting hospitals Direct cost allocation to patients Data used for calculationof DRG weights Austria 20 reference hospitals (~8% of all hospitals) grosscosting x England all hospitals top down microcosting x Estonia All hospitals contracted by the NHIF top down microcosting x Finland 5 reference hospitals (~30% of specialised care) bottom up microcosting x France 99 hospitals (~ 13% of mainlytop down inpatient admissions) microcosting x Germany ~250 hospitals mainly bottom up (~ 15% of all hospitals) microcosting x Ireland Poland Imported DRG systems and weights (or with only minor modifications) Portugal The Netherlands unit costs: 15-25 hospitals (~ 24% of all hospitals) bottom up microcosting x Spain Sweden (~ 62% of inpatient admissions) ImportedDRG systems and weights bottom up microcosting x 21
Data collection Cost accounting in hospitals: how Germany does it Demographic data Clinical data Cost data Sample size, regularity 99 cost categories! 22
How to calculate costs and set prices fairly (I) Based on good quality data (not possible if cost weights imported) Cost weights x base rate vs. Tariff + adjustment vs. Scores (see below) costweight (varies by DRG) Price setting Average costs vs. best practice (for few HRGs in England) Relative weight (e.g. Germany) Raw tariff (e.g. France) Raw tariff (e.g. England) 1.0 3000 3000 base rate or adjustment 3000 (+/-) (varies slightly by state) Cost weights Base rate(s) Prices/ tariffs Average vs. best 1.0 (+/-) (varies by region and hospital) 1.0 1.32 (varies by hospital) Score (e.g. Austria) 130 points 30 X X X X 23
How to calculate costs and set prices fairly (II) Country Monetary conversion/ adjustment factors Applicability of conversion rate / adjustment factors Austria (Implicit) Point value Depending on state England Market forces factor Hospital-specific Estonia Base rate Nationwide Finland Base rate Hospital-specific France (1) Regional adjustment (2) Transition coefficient (until 2012) (1) Region-specific (2) Hospital-specific Germany Base rate State-wide Ireland Base rates (1) Specific to one of four hospital peer groups (2) Hospital-specific Netherlands Direct (no conversion) Not applicable Poland Point value Nationwide Portugal Base rate Hospital peer group Spain (Catalonia) (1) Direct (no conversion) (2) Base rate (1) Not applicable (2) Region-wide (CMS-DRGs) Sweden Base rate County-specific Price setting Cost weights Base rate(s) Prices/ tariffs Average vs. best 24
Incentives of DRG-based hospital payment 1 Being aware of incentives and hospital strategies in times of DRGs Costs/ revenues ˆp 2 2) Increase revenue Total costs of treating one patient 1 R = ˆp 1 1b) Reduce intensity of services 1a) Reduce LOS LOS Options to avoid deficits under activity based payments 25
Incentives of DRG-based hospital payment 1. Reduce costs per patient 2. Increase revenue per patient 3. Increase number of patients Incentives and hospital strategies Strategies of hospitals a) Reduce length of stay optimize internal care pathways inappropriate early discharge ( bloody discharge ) b) Reduce intensity of provided services avoid delivering unnecessary services withhold necessary services ( skimping/undertreatment ) c) Select patients specialize in treating patients for which the hospital has a competitive advantage select low-cost patients within DRGs ( cream-skimming ) a) Change coding practice improve coding of diagnoses and procedures fraudulent reclassification of patients, e.g. by adding inexistent secondary diagnoses ( up-coding ) b) Change practice patterns provide services that lead to reclassification of patients into higher paying DRGs ( gaming/overtreatment ) a) Change admission rules reduce waiting list admit patients for unnecessary services ( supplier-induced demand ) b) Improve reputation of hospital improve quality of services focus efforts exclusively on measurable areas 26
How European DRG systems reduce unintended behaviour: 1. long- and short-stay adjustments Revenues Actual reimbursement Short-stay outliers Inliers Long-stay outliers Volume limits Outliers High cost cases Quality Innovations Negotiations Deductions (per day) Surcharges (per day) LOS Lower LOS threshold Upper LOS threshold 27
How European DRG systems reduce unintended behaviour: 2. Fee-for-service-type additional payments Actual reimbursement Volume limits Outliers High cost cases Quality Innovations Negotiations Payments per hospital stay Payments for specific highcost services Innovationrelated add l payments England France Germany Netherlands One One One Several possible Unbundled HRGs for e.g.: Chemotherapy Radiotherapy Renal dialysis Diagnostic imaging High-cost drugs Séances GHMfor e.g.: Chemotherapy Radiotherapy Renal dialysis Additional payments: ICU Emergency care High-cost drugs Supplementary payments for e.g.: Chemotherapy Radiotherapy Renal dialysis Diagnostic imaging High-cost drugs No Yes Yes Yes Yes (for drugs) 28
How European DRG systems reduce unintended behaviour: 3. adjustments for quality Actual reimbursement Volume limits Outliers High cost cases Quality Innovations Negotiations England & Germany: no extra payment if patient readmitted within 30 days Germany: deduction for not submitting quality data England: up 1.5% reduction if quality standards are not met France: extra payments for quality improvement (e.g. regarding MRSA) 29
How DRG systems try to counter-act such behaviour: quality Actual reimbursement Volume limits Outliers High cost cases Quality Innovations Negotiations 30
4. Frequent revisions of PCS and payment rates Country PCS Payment rate Frequency of updates Time-lag to data Frequency of updates Time-lag to data Austria Annual 2 4 years 4 5 years 2 4 years England Annual Minor revisions annually; irregular overhauls about every 5 6 years Annual 3 years (but adjusted for inflation) Estonia Irregular (first update 1 2 years Annual 1 2 years after 7 years) Finland Annual 1 year Annual 0 1 year France Annual 1 year Annual 2 years Germany Annual 2 years Annual 2 years Ireland Every 4 years Not applicable (imported Annual (linked to 1 2 years AR-DRGs) Australian updates) Netherlands Irregular Not standardized Annual or when considered necessary 2 years, or based on negotiations Poland Irregular planned 1 year Annual update only of 1 year twice per year base rate Portugal Irregular Not applicable (imported Irregular 2 3 years AP-DRGs) Spain (Catalonia) Biennial Not applicable (imported Annual 2 3 years 3-year-old CMS-DRGs) Sweden Annual 1 2 years Annual 2 years 31
How do DRG systems deal with innovations? Actual reimbursement Volume limits Outliers High cost cases Quality Innovations Negotiations 32
How do DRG systems deal with innovations? Actual reimbursement Volume limits Outliers High cost cases Quality Innovations Negotiations 33
List B DBCs as basis for price negotiations in the Netherlands Actual reimbursement Volume limits Outliers High cost cases Quality Innovations Negotiations 34
Conclusions DRG-based hospital payment is the main method of provider payment in Europe, but systems vary across countries Different patient classification systems DRG-based budget allocation vs. case-payment Regional/local adjustment of cost weights/conversion rates To address potential unintended consequences, countries implemented DRG systems in a step-wise manner operate DRG-based payment together with other payment mechanisms refine patient classification systems continously(increase number of groups) place a comparatively high weight on procedures base payment rates on actual average (or best-practice) costs reimburse outliers and and high cost services separately update both patient classification and payment rates regularly If done right (which is complex), DRGs can contribute to increased transparency and efficiency and possibly quality 35
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