Diagnosis Related Groups and AR-DRGs - Introduction

DRG Workshop Belgrade, 18-22.November 2013.

Diagnosis Related Groups and AR-DRGs - Introduction

Prof Ric Marshall OAMThe University of Sydney.


QUESTIONS• When asked to use DRGs people want to

know.– What are DRGs?– What are DRGs useful for?

• People wanting to use DRGs usually have some purpose in mind.– How can DRGs help us to … ?

• What people who use them want to know about how they work – their limitations.


Paying for health services based on activity rather than expenditure

The usual context:-


WHY DRG’S?

• IF USED EFFECTIVELY AS A FUNDING TOOL– DRG’s help to focus on hospital efficiency and

quality.– DRG’s help to contain growth in hospital costs.

• THE DRG IS JUST THE TOOL NOT THE POLICY


Health sector

outputs

Hospital services

Personal health

services

1: public health

services

5: tertiary hospital services

4: hospital inpatient services

3: hospital-based

ambulatory services

2: non-hospital services

2-1: home care

5-1: tertiary severity

5-3: teaching

5-2: research

4-5: nursing maintenance

4-4: palliation

4-3: rehabilitation

4-2: acute inpatient care

4-1: intensive care

3-2: emergency department

1-1: food and drugs safety

1-2: environmental

1-3: health protection

3-1: outpatient clinics

2-6 dental

2-5: other non-hospital services

2-4: nursing home services

2-3: specialist medical care

2-2: primary medical care

Subacute inpatient

care

5 major 5 major productproduct groupsgroups

18 major 18 major product product

subgroupssubgroups

DRGS


Hospital Inpatient Care

• Goals, incentives– efficient use of available resources such as

same day surgery– close integration with non-acute care settings

to support early discharge and effective post discharge care

– good health outcomes and minimisation of adverse events

– optimisation of patient convenience

• Episode focus – eg DRGs


THE 4 Components of a drg funding system

What is needed to fund a hospital system by DRG payments???


Component 1: Data Elements Required to Assign Cases to DRGs

ICD-10-AM CodesICD-10-AM Codes Principal diagnosisPrincipal diagnosis Additional diagnoses, Additional diagnoses,

complication, co morbiditycomplication, co morbidity Procedure/s (ACHI)Procedure/s (ACHI)

ICD-10-AM CodesICD-10-AM Codes Principal diagnosisPrincipal diagnosis Additional diagnoses, Additional diagnoses,

complication, co morbiditycomplication, co morbidity Procedure/s (ACHI)Procedure/s (ACHI)

Patient agePatient age Or Admission Date and Date Or Admission Date and Date

of Birthof Birth

Patient agePatient age Or Admission Date and Date Or Admission Date and Date

of Birthof Birth

Mode of separation (discharge Mode of separation (discharge status)status) National Standard, includes National Standard, includes

died, transferreddied, transferred

Mode of separation (discharge Mode of separation (discharge status)status) National Standard, includes National Standard, includes

died, transferreddied, transferred

SexSex SexSex

Same-day StatusSame-day Status Same-day StatusSame-day Status

Newborn admission weightNewborn admission weight For age 28 days or less, plus For age 28 days or less, plus

older if less than 2500 gramsolder if less than 2500 grams

Newborn admission weightNewborn admission weight For age 28 days or less, plus For age 28 days or less, plus

older if less than 2500 gramsolder if less than 2500 grams

Intensive care flagIntensive care flag Time in ICU, HMVTime in ICU, HMV

Intensive care flagIntensive care flag Time in ICU, HMVTime in ICU, HMV

Length Of StayLength Of Stay Or Admission and Separation Or Admission and Separation

DatesDates

Length Of StayLength Of Stay Or Admission and Separation Or Admission and Separation

DatesDates


Component 2: WHAT IS THE PRICE?

Three days in hospital= 900YTL

Three days of nursing= 300YTL

Operation anaesthesia, theatre pack= 1000YTL

Ten pathology tests= 250YTL

Eight specialist consultations= 400YTL

•? 1000+300=1300•? 1000+300+400=1700•? 1000+900+300+250+400=2850


HOW MUCH DOES A DRG COST?

Ward Medical 348 Oper Rooms 374Ward Nursing 736 Emerg Depts 114Non Clinical Salaries 165 Supplies 151Pathology 108 Spec Proc Suites 36Imaging 86 Pros-theses 70Allied 64 On-Costs 141Pharmacy 140 Hotel 105Critical Care 225 Deprec 86

Total 2949


Non-admittedBonus fundin

Quality fund incl materni

Electiv surgery

DRG payments Total

'000s 000s '000s '000s '000s '000s

H1 81,301.51 2,228.97 0.00 8,361.72 297,957.72 585,935.59

H2 45,272.64 1,895.04 1,077.72 3,888.00 220,373.13 361,685.64

H3 86,143.27 3,193.91 538.77 2,666.70 383,295.22 697,197.03

H4 15.59 0.00 0.00 0.00 0.00 28,834.54

H5 72,649.31 6,687.10 2,933.15 3,241.23 393,193.11 604,858.67

H6 76,254.00 2,228.97 0.00 3,205.65 340,554.13 586,677.36

H7 36,699.67 0.00 3,495.02 0.00 159,497.49 222,322.82

H8 37,914.00 2,228.97 1,264.22 684.00 166,836.32 302,242.38

H9 34,588.24 2,228.97 1,338.30 1,445.21 215,701.91 352,410.69

H10 16,127.65 0.00 0.00 0.00 73,333.68 170,508.49

etc etc etc etc etc etc etcTotal 890,120.32 36,627.05 21,083.65 46,837.05 3,735,355.30 6,447,229.99

Component 3:Component 3: MODELLED BUDGETS MODELLED BUDGETS EXAMPLEEXAMPLE


Component 4: How do you change funding method?

• Phasing– Transition strategy– Initial steps

• Policy design• Consensus• Modelling and

demonstration


DRGs Implementation Germany


Healthcare system outputs rather than inputs


How does your garden grow?

1999 - 2005

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DO BUDGET ALLOCATIONS AFFECT HOSPITAL EXPENDITURE?


In 1982, Congress mandated the use of a prospective payment system and in 1983 the Medicare program implemented a DRG-based payment system

Medicare Spending as a Percent of Total Health Expenditures, 1970–2001

Why Did USA Medicare Program Decide to Use DRGs for Payment?

Source: Katharine Levit et al., “Health Spending Rebound Continues in 2002,” Health Affairs (January/February 2004).


Provider Payment Methods

• ITEMISED BILLING – “Fee for Service”

• BUNDLED BILLING – “Per episode”

• CAPITATION FUNDING – “Per patient”

• GLOBAL BUDGETS – “Historic plus”


Why diagnoses are more useful than procedures

• They allow clinical discretion

• The clinician is the resource manager

• Paying on procedures means more procedures results in more payment

• Best value for money (outcome) is more important than the lowest cost or the greatest quantity of treatment


The idea of resource homogenous categories

• Payment within groups should be related to the average or benchmark cost of providing the service.

• If cost is too variable: – some providers may select only the least

complex lowest cost cases. “cream skimming”– some providers may be at risk of getting the

most complex and expensive cases.– ANALYSIS OF DATA – BOTH PAYER AND HOSPITAL


The idea of clinically meaningful categories

• for describing healthcare services

• Classes must contain like with like cases from a clinical point of view – eg – Similar skills and facilities required to treat. – Similar care protocols used– Comparable in terms of outcome

expectations.


The idea of the Diagnosis Related Group


20082007200620052004200320022001200019991998199719961995199419931990198919881987


AR-DRG Major Diagnostic Category Version 5.2

Version 6.0

Version 6.x

Pre Major procedures - principal diagnosis associated with any MDC 12 17 171 Diseases and disorders of the nervous system 53 61 612 Diseases and disorders of the eye 20 19 193 Diseases and disorders of the ear, nose, mouth and throat 28 27 274 Diseases and disorders of the respiratory system 42 47 475 Diseases and disorders of the circulatory system 67 80 806 Diseases and disorders of the digestive system 52 46 467 Diseases and disorders of the digestive system 52 46 467 Diseases and disorders of the hepatobiliary system and pancreas 29 28 288 Diseases and disorders of the musculoskeletal system and connective tissue 79 83 839 Diseases and disorders of the skin, subcutaneous tissue and breast 29 34 36

10 Endocrine, nutritional and metabolic diseases and disorders 19 28 2811 Diseases and disorders of the kidney and urinary trac 37 37 3712 Diseases and disorders of the male reproductive system 19 16 1613 Diseases and disorders of the female reproductive system 20 18 1814 Pregnancy, childbirth and the puerperium 17 14 1915 Newborns and other neonates 25 25 25

16Diseases and disorders of the blood and blood forming organs and immunological disorders 10 9 9

17 Neoplastic disorders (haematological and solid neoplasms) 18 18 1818 Infectious and parasitic diseases 17 18 1819 Mental diseases and disorders 13 11 1320 Alcohol/drug use and alcohol/drug induced organic mental disorders 8 6 721 Injuries, poisoning and toxic effects of drugs 24 29 2922 Burns 8 8 823 Factors influencing health status and other contacts with health services 13 13 13

Unrelated OR DRGs 0 3 3Error DRGs 6 3 3

717 744 754


So, in summary, DRGs:-

• Describe the number and type of patients– The Mix of cases – limited number of categories

• Resource homogeneity, Clinically meaningful• Used:-

– As funding indicator or payment scale BUT ALSO– To compare how different hospitals treat patients in

different conditions– To identify treatment trends– In quality improvement activities– To identify the types of patients hospitals treat– For retrospective data analysis for research


questions

Documents

Diagnosis Related Groups and AR-DRGs - Introduction