The application of diagnostic specific cost profiles to cost and reimbursement control in hospitals

Abstract

A system has been developed to generate hospital budgets based on the types of patients served. Several hundred classes of patients are defined according to clinical attributes such as diagnoses and surgical procedures, and for each class a profile of resources consumed is determined. The class definitions are based both on homogeneity of patient care processes as well as resource consumption. These profiles are expressed as revenues generated by charging departments and as costs both direct and indirect for all services. A methodology has been developed to associate all indirect costs with their source for each service included in the profile. From a forecast of patient load by class, budgets can be computed from the cost profiles and revenues determined from the charging profiles. Further analysis thus can include the effect of changes in case mix as well as changes in patient care processes. The effect on revenues of different reimbursement mechanisms can also be projected as a function of the case mix. The system is currently being implemented for demonstration and evaluation of the Yale-New Haven Hospital.

Impact of the new payment system on laparoscopic appendectomy in Korea

“…Therefore, controlling costs without compromising the quality of health care or patient safety is one of the major concerns of governments. The concept of the diagnosis related group (DRG) classification, a clinically meaningful classification that defines patient groups according to similar resource consumptions, was outlined at Yale University in 1975 [2,3] and a DRG-based prospective payment system (PPS) was implemented in the United States for the first time in 1983 [4]. DRG-based reimbursement refers to a fixed-rate payment system for each hospital stay based on the DRG.…”

Comparison of cost accounting methods from different DRG systems and their effect on health care quality

“…At the end of the 1960th a group around Robert Fetter started to develop a casemix system that aimed at better cost and effectiveness control within the large American university hospitals [10,11]. Later on the resulting DRG system was adopted nationally to allow cost savings within the national health system.…”

“…Diagnostic related payment is based on a fixed payment per patient related to the patient's main diagnosis. The concept of diagnostic related payment has been outlined by a group at Yale University in 1975 originally [9,10]. Within their original concept the authors named three different objectives: (1) reducing costs; (2) increasing benefit and (3) increasing quality of health care systems.…”

Case Mix Measures: DRGs and Alternatives

“…But like all statistically based systems, ORGs and PP S drive their validity from the Law of Large Numbers and the other laws of probab ility. If total PPS payments to hospital Y in any given year are reasonably close to whatever standards of reasonable payment one wishes to apply, given that hospital's mix of actual cases, that is prob ab ly all one can reasonably expect (22,34,116).…”