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Session: DRG systems in Europe: How similar, how divergent? First empirical results
Room: Congress Hall A
Time: Fri 10:15-11:30

Presenter: Zeynep Or (IRDES. )

Abstract

In most European countries Diagnostic Related Groups (DRGs) are introduced initially for better describing hospital services, for improving the measurement and management of hospital production. Increasing the transparency of care procedures and hence evaluation of hospital performance is also seen as a way of improving the quality of care in hospitals. However, DRGs are used increasingly for financing hospital activity.

Activity based payment systems using DRGs present an inherent risk for the quality of care since they provide direct incentives to reduce the cost of hospital stays without regard for outcomes. While hospitals can cut-down unnecessary services and improve efficiency though organizational changes, they can also skimp on quality as a way of cost-saving, placing the patient's health at risk.
There are many different ways that the activity based funding (ABF) using DRGs may create perverse incentives which would impact quality. These include supplying more or fewer services to a given type/severity of patient (moral hazard); discouraging treatment of patients whose expected cost are likely to be higher than the expected reimbursement or overspecializing in areas where the average severity of illness is lower (patient selection); and manipulating the severity of cases treated to receive higher reimbursement (DRG creep). For example, providers may discharge patients earlier than clinically appropriate, omit medically indicated tests and therapies, over-provide certain services to push the patient into a higher-paying category to optimize the payments they get.

The presentation will explore the possible negative impacts of ABF in terms of treatment policy and medical outcomes. We will first discuss why quality of care requires specific attention when designing payment systems and how it could be taken into account. We then review the available country evidence concerning the impact of DRG-based payment on quality of care and introduce a few experimental designs of ABF which explicitly take into account care quality. We will conclude with some recommendations for ensuring a DRG payment design which will not lead to deterioration in the quality of care.

DRG based payment represents risks but also provides opportunities for improving quality of care. Since prices are explicit, it is possible to give explicit incentives for procedures considered “better quality”. This requires in turn continuous refinement of data and indicators for monitoring quality.

Key Terms

DRG, quality, payment incentives

Authors:

Zeynep Or (IRDES) and Unto Häkkinen (CHESS)

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