DRGBased Hospital Financing A ROADMAP TO A BETTER HOSPITAL FUNDING

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DRG-Based Hospital FinancingA ROADMAP TO A
BETTER HOSPITAL FUNDING

• Dr. Amr Fouad
• Marketing Consultant
• CCO, MoHP

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Healthcare Reform Pillars
Finance
Organization
Regulation
Personnel
Control Knobs
DRG
Intermediate Performance Criteria
Efficiency - Equity - Quality
Better Health Status
Financial Protection
Customer Satisfaction
Goals
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DRG . . . Definition
Diagnosis Related Groups

• Hospital Reimbursement System based on a
  case-mix classification that groups patients
  according to their similar Clinical Cost
  characteristics.

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DRG . . . Concept

• In Healthcare
• ? complex interrelated consumption of
  resources
• ? difficult definition of output measures
• ? quality cost control Issues gets more
  complicated
• So it was expected that
• ? grouping customers who consume similar
  resources and for whom the production process
  follows a predictable identified path
• ? control the production process

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DRG . . . Why?

• The researches wanted to know if industrial cost
  quality control methods could be adapted
  applied to the hospital industry.
• In order to talk about quality of healthcare,
  we need to be able to identify classes of
  patients for whom the processes procedures are
  homogenous and can be obtained and for whom the
  clinical attributes produce consensus concerning
  patient management decisions and paths within and
  across the healthcare facility.

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DRG . . . Evolution

• 1960 ? A study by-product, Yale Univ.
• 1970 First Case-Group definition
• MDC Major Diagnostic Categories 23
• ? 202 surgical DRG
• 269 medical DRG
• 1983 First application of DRG as a hospital
  finance system (Medicare)
• 1990 DRG classification according to
  complications comorbidity
• DRG with CC
• DRG without CC
• 1996 60 of West. Europe 90 of USA hospitals
  are billed by DRG

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DRG . . . Development

• Detailed recording of patient data
• Classification into mutually exclusive categories
• Partitioning into smaller DRGs that are
  medically statistically meaningful
• Assigning each patient case according to its
  pattern of care received resource consumption
  to its category
• Differences detected that are having identifiable
  measurable causes are put under new diseases
  groups
• Comparison of profiles with other credible
  institutions

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DRG . . . Development
38,000 Code
Known Diseases
?
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DRG . . . Classification
DRG
Could be classified according to
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Requirements of a DRG system

• Coding Mechanism
• Code Classification for Diagnosis (ICD-10)
• Code Classification for Procedures (ICD-9)
• Grouper Software
• Plausibility (Credibility) Checks

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Various Uses of DRG Around the World

• Measure clinical activity
• Financing Funding of Hospitals
• Tool for internal hospital management
• Tool to begin measuring quality and utilization
• Hospital clinical and financial decision-making
• Physician comparative statistics and provider
  profiling
• Quality of care comparisons within and across
  hospitals
• Support for clinical pathways, protocols, and
  continuous quality improvement projects
• Establishing data and definition type standards

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DRG-Based Hospital Finance System

• Hospital Finance (Funding) Systems
• At the national level
• Example Egypt

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Hospital Funding Systems
In Egypt
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Positioning of DRG among other Known Hospital
Funding Systems
RISK
Payer
Provider
Fee For Service (Reimb.)
Per Admission
Case Mix (DRG)
Per Diem
Capitation
Global Budget
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DRG-Based Hospital Finance System

• A DRG-based financing system can distribute
  limited healthcare resources in a fair, equitable
  and transparent manner to providers guarantee
  better provision of care to patients through
  providing
• the right amount of care is provided
• in the right setting
• in the most efficient manner
• in the most quality conscious manner
• developing clinical pathways (i.e., lower
  practice pattern variation).

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DRG-Based Hospital Finance System
How can we developour Egyptian DRG
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2 Main Components

• Component 1 Defining the cases treated
• Coding
• Grouping
• ? Then Data collection Analysis
• Component 2 Assigning prices based on the costs
  of cases treated
• Costing
• ? Then Data collection Analysis

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(1) Defining the Case
How can we develop our Egyptian DRG

• Develop and use standard definitions for all
  hospitals for the following
• Admission
• Discharge
• Inpatient
• Outpatient
• Same-day

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(2) Coding
How can we develop our Egyptian DRG

• Coding translates clinical information for
• Epidemiology
• Research
• Financing
• policy analysis
• Planning health services
• Costing
• Health outcome analysis

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(3) Assigning Codes to Case
How can we develop our Egyptian DRG

• Accurate coding is a skill that must be learned
  and is dependent on
• Training appropriate individuals in assigning
  appropriate and complete diagnosis and procedure
  codes to patient records
• Accuracy of medical record documentation
• Availability of ongoing coding guidance
  materials

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(4) Assigning Cases to DRG
How can we develop our Egyptian DRG

• Often called Grouping and needs a Grouper Sw
• Relies on various data elements, most
  importantly diagnosis procedure codes
• Previous accurate and complete documentation and
  proper assignment of codes is critical

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Elements Required for Grouping

• ICD-10-AM Codes
• Principal diagnosis
• Additional diagnoses, such as complications and
  comorbidities
• Procedure/s

• Sex

• Length Of Stay
• Or Admission and Separation Dates

• Same-day Status

• Patient age
• Or Admission Date and Date of Birth

• Newborn admission weight
• For age 28 days or less, plus older if less than
  2500 grams

• Mode of separation (discharge status)
• National Standard, includes died, transferred

• Mental Health Legal Status
• Voluntary or involuntary

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(5) Formation of DRG Assignment Summary
How can we develop our Egyptian DRG
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(6) Costing Calculating cost for each case
How can we develop our Egyptian DRG

• Using aggregate cost data to calculate a price
  for each DRG
• Develop DRG price list
• Once an average cost is computed for each DRG,
  the financing institution can establish a price
  for each DRG i.e., hospital product
• Once hospital products are assigned to prices,
  these prices can be used to either create a
  hospital payment system (Reimbursement) and/or to
  create a hospital budgeting system based on the
  expected number and types of cases treated

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Surrogate Costing (Trial not recommended)
How can we develop our Egyptian DRG

• The average USA-DRG Price for Uncomplicated
  Cholecystectomy for lt 40 years ? 3000
• Multiplied by the Exchange Rate of ? 16,500 EG
  P
• Multiplied by the PPP of the EG P which (in
  services) is equal to 1.8 ? 5400 EG P
• If we deduct the cost of quality difference
  between USA Egyptian hospitals (ranges 30-40)
  ? 3200 EG P

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Benefits of DRG system
4 Levels
National Healthcare
Healthcare Market
Hospital
Pt
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At the Patient Level

• Reducing the patients length of stay
• Reducing the mix of diagnostic and therapeutic
  procedures
• Transferring complicated patients to specialized
  hospitals
• Increasing the iintensity of care in the first
  few days of hospitalization to reduce the overall
  length of stay

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At the Hospital Level

• Measure clinical activity
• Predictable revenue stream
• Efficiency incentives
• Prepare comparisons within across hospitals
  physicians
• Negotiating Power with purchasers of care
• Create a common language between management
  medical staff
• Provide services in the most appropriate care
  settings
• Improve health care outcomes and quality of care

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At the Hospital Level

• Improves management capacity as it
• Obligates Financial and HR Planning
• Obligates a cost analysis mechanism
• Obligates Quality Consideration to work on the
  length of hospital stay, waste management, and
  inter-departmental Cooperation
• Improves management Information System through
• Information preservation Tool
• Statistics Tool
• Data Analysis Tool

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At the Healthcare Market Level
? Acts as a Marketing Regulating Tool

• Stimulates Hospital Competition
• Free pt.
• Private hospitals
• Suggests Merging /or Acquisition of small
  entities into greater organizations

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At the National Level

• Inevitable accessibility to national Ratios
  Averages of diseases procedures
• Anti-Fraud Mechanism (Claims)
• Creates financial pressure on hospitals to seek
  alternatives for cost control
• Measure clinical activity
• Efficient, equitable, and a transparent
  allocation of limited resources using hospital
  data
• Knowledge of whos providing what allows better
  assessment and planning of health care services
• Efficient resource use/less waste can result in
  more funding for other care settings and health
  initiatives
• Hospital and overall healthcare system
  comparisons possible by using data and management
  reporting tools
• Improved quality of care and care delivery in the
  most appropriate setting

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DRG System Flaws

• Patient selection by the Hospital
• Can not include some hospital services
• Blood Transfusion
• Highly expensive drugs
• difficulty in grouping some conditions
• Multiple Trauma
• Out-patient services
• Critical Care
• Mental Health
• HIV

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We Conclude,

• DRG-based financing is a highly effective system
  for funding hospitals either under budgeting or
  reimbursement ways.
• It is not recommended at all to import a
  ready-made DRG database of another country.
• Egypt must take the step towards establishing its
  own DRG in order to make health finance easier
  and more calculatable and have accurate index
  of national averages and ratios.

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Thank You

• Dr. Amr Fouad