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PubMed2006

Accounting and reimbursement schemes for inpatient care in France.

The new French case-mix system of hospital payment was adopted in 2004 for public hospitals and in March 2005 for private-for-profit hospitals. Implementing this reform requires a period of transition but the challenges ahead can already be predicted. Prices will have to change before this mode of reimbursement can have any real impact. This requires producing more detailed hospital cost data and using fine measuring tools such as the cost accounting method developed for use in this context. This article describes and analyses the main tools and methods selected to implement the new French prospective payment system.

Accounting↗

PubMed2002

Medicare payment system for ambulatory surgical centers.

Ambulatory Surgical Centers are paid under a fee schedule for eight service cost categories. The fee schedule is geographically wage adjusted and is updated annually. Anticipated future adjustments to the Ambulatory Surgical Centers prospective payment system (PPS) includes conversion to resource based rates.

Accounting↗

PubMed1985

Prospective pricing system and its effect on the principles and practice of infectious diseases.

The health care industry in general and hospitals in particular face an uncertain future as the federal government moved with unusual speed to enact sweeping Medicare legislation. These changing patterns of reimbursement reverse key economic incentives by which hospitals have been driven since the federal program for the elderly began 18 years ago. "Reasonable" cost reimbursement has been replaced by a policy that requires Medicare to establish and fix prices in advance, on a cost-per-case basis, using as a measure 467 categories called "diagnosis-related groups." These changes will present new challenges for the health care industry and will need innovative approaches to meet them. The prospective pricing system attempts to reverse the escalation of health care costs. Under this system, hospitals can realize greater profits only by reducing costs, not by incurring them. The prospective payment system will have profound effects on the practice of infectious diseases, and the potential impact on hospitals, the pharmaceutical industry, physicians, and patients will have to be studied in detail.

Ancillary Services, Hospital↗

PubMed1986

Can Medicare prospective payment survive the ICD-9-CM disease classification system?

The Medicare prospective payment system represents a fundamental change in hospital payment. The diagnosis-related group (DRG) patient classification scheme serves as the modifier of payment for this system. The DRG definitions are, in turn, based on the International Classification of Disease, 9th Revision, Clinical Modification (ICD-9-CM). Deficiencies in the ICD-9-CM coding system directly affect the equity of the Medicare payment system. A review of the ICD-9-CM system identifies three principal problems: the inability of the system to reflect clinically important patient attributes adequately; the use of outcome, rather than approach, to code surgical procedures; and the blurring of clinical specificity by the adoption of certain coding rules. If these deficits in coding specificity are not corrected, it is unlikely that DRGs will adequately distinguish clinically unique types of patients. This inability to differentiate among patients threatens to undermine the equity of Medicare payments. Physicians must become more aware of disease coding and more involved in its development and implementation.

Diagnosis-Related Groups↗

PubMed2003

Estimating private sector payments for VA specialized inpatient care.

OBJECTIVES: To describe methods for estimating what payments to private sector providers might be for specialized inpatient care in the absence of Veterans Health Administration (VA) facilities. METHODS: Psychiatric, rehabilitation, domiciliary, partial and day hospitalization, and psychiatric residential treatment programs at six study sites were audited for program content that would meet Medicare criteria for excluding providers from the prospective payment system. A 10% sample of patients in each program was also audited to see if they met VA program criteria. For programs similar to prospective payment system-exempt community-based providers, total days of care were valued at per diem rates calculated for those Medicare providers. RESULTS: Not all specialized programs at the study sites were similar to private sector programs. Day hospitalization programs did not involve physicians, and inpatient psychiatric care was judged to be payable under acute diagnosis-related groups. Blind rehabilitation was different from any private sector program identified. For programs qualifying under Medicare exclusion rules, a majority of patients would meet criteria with minor changes in VA documentation. DISCUSSION: Researchers need to separate specialized inpatient care from acute services in estimating payments. This caution applies especially to rehabilitation, psychiatric, and long-term care, often provided to patients in VA acute bedsections. As with Medicare, benefits extend to higher costs of care not correlated with current measures of acuity or diagnoses. Medicare bases payments on the costs of the specialized providers of this care.

Data Collection↗

PubMed1991

Using DRGs to pay for inpatient substance abuse services: an assessment of the CHAMPUS reimbursement system.

In October 1988, the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) introduced a prospective payment system based on diagnostic-related groups (DRGs) to pay for substance abuse services. These services were initially excluded from the new payment system because of concerns that a DRG-based system may have a large and poorly understood financial impact on individual hospitals. This report assesses the performance of a DRG system in explaining variation in costs at the individual patient level and evaluates how well this payment system predicts resource use across hospitals. Overall, the substance abuse DRGs explained only 4.2% of the total variance in charges. It was found that the Medicare DRG-based system had to be modified to reflect the characteristics of the younger CHAMPUS population by splitting DRG 435 to account for the increased costliness of beneficiaries younger than 21 years. In addition, the study revealed substantial variation in the impact of the DRG system on hospital revenue. These differences largely reflected significant differences between general and specialty hospitals.

Adult↗

PubMed1986

Patient education financing under Medicare.

This paper traces the history of Medicare policies and practices with respect to reimbursement for preventive health care services and examines future propositions and trends for such reimbursement to hospitals and physicians. The discussion focuses on fee-for-service reimbursement under Medicare Part B (Supplementary Medical Insurance). Reimbursement under Part A (Hospital Insurance) for outpatient diabetes education is also described. The types of services and circumstances for which Medicare Part B provides reimbursement are explained. The paper describes a variety of outpatient preventive clinical and educational services that are reimbursable when ordered by a physician for diagnosis of a suspected illness or pathology or for treatment of same. The importance of the manner of claim presentation to Medicare carriers or intermediaries is emphasized. The concluding sections examine reimbursement for inpatient hospital education under Medicare Part A in light of the growing impact of the prospective pricing system's diagnosis-related groups (DRGs). The influence of the Tax Equity and Fiscal Responsibility Act on Medicare beneficiaries' enrollment in health maintenance organizations is recognized, and implications of the prospective payment system for health education practitioners are outlined.

Insurance, Physician Services↗

PubMed1997

Classifying rehabilitation inpatients by expected functional gain.

OBJECTIVES: To create a more suitable payment system for medical rehabilitation, the authors developed a companion classification system to the original functional independence measure-function-related groups (FIM-FRGs), which classify patients having similar lengths of stay in a rehabilitation hospital or inpatient unit. The companion system presented here groups patients according to their gains in functional status during the rehabilitation stay. METHODS: Data from 84,492 patients discharged from 252 rehabilitation facilities in 1992 were provided by the Uniform Data System for Medical Rehabilitation. Classification rules were formed using clinical judgment and a recursive partitioning algorithm. The gain-FRGs system used four predictor variables: (1) diagnosis leading to disability, admission scores on the (2) motor and (3) cognitive subscales of the FIM, and (4) patient age. RESULTS: The gain-FRGs system contained 74 patient groups and explained 21% of the variation in functional gain for patients in a different set of records withheld for validation. CONCLUSIONS: The gain-FRGs system should be considered for prospective payment systems because it gives the provider an incentive to improve patient outcomes, which is missing in a payment system based on FIM-FRGs alone.

Activities of Daily Living↗

PubMed1990

Medicare program; Geographical Classification Review Board; procedures and criteria--HCFA. Interim final rule with comment period.

This interim final rule with comment period implements provisions of the Omnibus Budget Reconciliation Act of 1989 establishing the Medicare Geographical Classification Review Board (MGCRB) and sets forth criteria for the MGCRB to use in issuing its decisions concerning the geographic reclassification of hospitals for purposes of payment under the prospective payment system.

Catchment Area, Health↗

PubMed1986

Assessing present and future capital expense levels under PPS.

The expected shift in the method of payment for capital costs will affect the way decisions are made by hospital executives. The capital expense ratio model is one way executives can better assess their present and future capital expense levels as payments begin to be made under a prospective payment system.

Capital Expenditures↗

PubMed1989

Hospital costs, resource characteristics, and the dynamics of death for surgical patients.

This article details data that suggest significant inequities in the current DRG prospective payment system vis-à-vis surgical mortalities. Important health policy issues, in addition to the ability of outcome data to function as a proxy for quality, involve the usefulness of stratifying DRGs vis-à-vis outcome or severity of illness in the future. Much interest has emerged in outcome data--especially with regard to its ability to function as a risk-adjusted quality-of-care screen for hospitals. A study of hospital resource consumption comparing survivors and mortalities demonstrated that surgical mortalities had a much greater intensity of hospital resource utilization and a substantial financial risk under Medicare's DRG prospective payment pricing system, as compared to surgical survivors. Hospital length of stay for mortalities proved very unprofitable. Emergency-admitted patients who died tended to have shorter hospital stays and less financial risk under DRGs than nonemergency mortalities. Mortalities referred to surgery from other clinical services tended to have greater resource utilization and financial risk under DRGs than nonreferred mortalities.

Adult↗

PubMed1992

Pricing and imperfections in the medical care marketplace.

To summarize: Some economic literature treats price determination in the medical marketplace as if it were similar to that of a standard marketplace. It seems more realistic to treat it as an outcome of one or more administered price systems. Such systems, may be formula-based, as is common in the United States (for example, the Prospective Payment System), or not (for example, a negotiated budget). In either case, however, the actual price is likely to deviate from the ideal price in part for lack of information. Plausible deviations can explain some observed phenomena. The inability to attain the ideal price, together with heterogeneity of patients, may also explain why in practice we observe several different bases of provider payment; for example, fee-for-service, capitation, and salary. All of these may be attempts to arrive at second best prices. Ignoring any welfare loss from raising revenue and assuming those with the largest marginal social valuation for the service are served first, errors in price setting lead to a welfare loss that is approximately proportional to the square of the deviation from the ideal price. If price setting is unbiased (i.e., errors have a mean of zero), the welfare loss is approximately proportional to the variance of the error in setting price. If price setting is biased, welfare loss is approximately proportional to the variance plus the square of the bias. Taking account of welfare loss from raising revenue may make monopsonistic pricing optimal. If one uses multiple bases of payment, for example both fee-for-service and capitation, one can average the errors that arise in each basis. This creates a gain from using a mixed system, in addition to those gains cited by other analysts, who focus on the method of reimbursement assuming what, in the present context, could be termed error-free price effects. The gains from averaging errors would appear available in any administered price system and are compatible with a wide variety of models of provider behavior.

Delivery of Health Care↗

PubMed1986

Reimbursement under diagnosis-related groups: the Medicaid experience.

The implementation of the Medicare prospective payment system has sparked the growth of similar Medicaid systems. Eight State Medicaid agencies now employ a system based on diagnosis-related groups (DRG's), and another four State Medicaid agencies are planning to implement such systems in the near future. The eight DRG-based systems in existence in 1986 are examined in this article. Preliminary evidence presented herein indicates that Medicaid DRG-based systems have experienced reduced rates of increase in expenditures for hospital services and that hospital admission rates have not increased under these systems.

Diagnosis-Related Groups↗

PubMed2000

Medicare's DRG-weights in a European environment: the Spanish experience.

Hospital payment systems are being changed to mixed systems, composed of case-mix categories and structure indicators. The Health Care Financing Administration's Diagnosis-Related-Groups (HCFA's DRG-weights are used in Catalonia as Prospective Payment System (PPS)-instruments for hospital inpatient reimbursement. The Catalonian and Spanish health systems, however, are very different from the US health environment. The aim of this study is to determine whether the HCFA's DRG-weights fit the special characteristics of a European environment. To do this, cost-based weights, determined from information from the cost accounting system of two public hospitals in Barcelona, are compared with Medicare-weights. A total of 35 262 discharges representing 12 794 million pesetas are analyzed. Medicare-weights do not differ globally from cost-based-weights and the adjusted correlation weighted least squares regression between the two weight-scales is 95%. There are, however, systematic deviations in six DRG-groupings. The most important deviations are concentrated in Ambulatory Surgery categories, in DRGs in which prostheses are used, and in specialties excluded from several PPSs because of extreme variables in treatment intensity. In conclusion, Medicare-weights can be used to pay hospital output in European environment but they should be adjusted to avoid systematic deviations.

Accounting↗

PubMed1986

Hospital management strategies for fixed-price payment.

The Medicare prospective payment system and pressures from business to change hospital financing demand new management strategies. This article explores specific steps hospital administrators can take to enable their institutions to cope effectively under prospective payment and new market conditions.

Diagnosis-Related Groups↗

PubMed1984

The impact of prospective payment: a multi-dimensional analysis of New Jersey's SHARE program.

The SHARE program, which set per diem prospective rates for New Jersey hospitals during the period 1975-1982, is evaluated. Analysis suggests that this program did contain hospital cost increase. However, the program threatened the viability of most inner-city hospitals. Indirect evidence suggests that there was cost-shifting in response to this program, which regulated payment for only Blue Cross and Medicaid patients. Structural features of this program and its successor, the New Jersey DRG program, are analyzed; and implications for the Medicare prospective payment system are examined.

Cost Allocation↗

PubMed1991

Prospective payment for Medicare hospital capital: implications of the research.

The special characteristics of capital have an important effect on the cross-section variation in hospitals' capital costs. Variables reflecting capital age and financing differences perform as expected and add substantial explanatory power to capital cost models. However, even with the inclusion of these variables, the capital-cost models perform poorly compared with total-cost models. The empirical findings of this article support using the total-cost models to develop a common set of adjustment factors for capital and operating payment amounts in the Medicare prospective payment system.

Capital Expenditures↗

PubMed2003

Financial success under PPS: how to beat the odds, Part II.

Whether you are a publicly held company or a small mom and pop agency, you have to maximize both efficiency and productivity while maintaining patient satisfaction and staff morale. In the new world of home care, this is a tall order. In the first installment of this two part series, which ran in the July 2002 issue of CARING the author reviewed the dimensions of financial success, issues of length of stay and episode of care, resource utilization planning, and reducing overhead. This second part covers overall productivity, clinical productivity, and management strategies to synergize financial success under the prospective payment system.

Efficiency, Organizational↗