Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА Prof Ric Marshall Interim Independent Hospital Pricing Authority, CANBERRA, AUSTRALIA Faculty of Health Sciences, University of Sydney DEC11 Fundamentals of Diagnosis related groups implementation

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА QUESTIONS Why do you want to know about DRGs? What do you want to know about DRGs?

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА PAYING FOR HEALTH SERVICES BASED ON ACTIVITY RATHER THAN EXPENDITURE

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА WHY DRG’S? IF USED EFFETIVELY 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

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА 5 major product groups 18 major product subgroups DRGS

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА 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

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА COMPONENTS OF A DRG FUNDING SYSTEM What is needed to fund a hospital system by DRG payments???

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА Component 1: Data Elements Required to Assign Cases to DRGs ICD-10-AM Codes ICD-10-AM Codes Principal diagnosis Principal diagnosis Additional diagnoses, complication, co morbidity Additional diagnoses, complication, co morbidity Procedure/s (ACHI) Procedure/s (ACHI) ICD-10-AM Codes ICD-10-AM Codes Principal diagnosis Principal diagnosis Additional diagnoses, complication, co morbidity Additional diagnoses, complication, co morbidity Procedure/s (ACHI) Procedure/s (ACHI) Patient age Patient age Or Admission Date and Date of Birth Or Admission Date and Date of Birth Patient age Patient age Or Admission Date and Date of Birth Or Admission Date and Date of Birth Mode of separation (discharge status) Mode of separation (discharge status) National Standard, includes died, transferred National Standard, includes died, transferred Mode of separation (discharge status) Mode of separation (discharge status) National Standard, includes died, transferred National Standard, includes died, transferred Sex Sex Same-day Status Same-day Status Newborn admission weight Newborn admission weight For age 28 days or less, plus older if less than 2500 grams For age 28 days or less, plus older if less than 2500 grams Newborn admission weight Newborn admission weight For age 28 days or less, plus older if less than 2500 grams For age 28 days or less, plus older if less than 2500 grams Intensive care flag Intensive care flag Time in ICU, HMV Time in ICU, HMV Intensive care flag Intensive care flag Time in ICU, HMV Time in ICU, HMV Length Of Stay Length Of Stay Or Admission and Separation Dates Or Admission and Separation Dates Length Of Stay Length Of Stay Or Admission and Separation Dates Or Admission and Separation Dates

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА 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 ? =1300 ? =1700 ? =2850

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА HOW MUCH DOES A DRG COST?

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА Non-admitted Bonus fundin Quality fund incl materni Electiv surgery DRG paymentsTotal '000s000s'000s H181, , , , , H245, , , , , , H386, , , , , H , H572, , , , , , H676, , , , , H736, , , , H837, , , , , H934, , , , , , H1016, , , etc Total890, , , , ,735, ,447, Component 3: MODELLED BUDGETS EXAMPLE

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА Component 4: How do you change funding arrangements? Phasing –Transition strategy –Initial steps Policy design Consensus Modelling and demonstration

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА DRGs Implementation Germany

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА HEALTHCARE SYSTEM OUTPUTS RATHER THAN INPUTS

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА How does your garden grow?

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА DO BUDGET ALLOCATIONS AFFECT HOSPITAL EXPENDITURE?

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА 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).

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА Provider Payment Methods ITEMISED BILLING – “Fee for Service” BUNDLED BILLING – “Per episode” CAPITATION FUNDING – “Per patient” GLOBAL BUDGETS – “Historic plus”

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА 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 the greatest quantity of treatment

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА 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

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА 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.

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА THE IDEA OF THE DIAGNOSIS RELATED GROUP

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА So, in summary, DRGs:- Describe the number and type of patients –The Mix of cases – limited number of categories Resource homogeneity, Clinical 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

Serbia Health Project – Additional Financing Training for Trainers on AR-DRG, Република Србија МИНИСТАРСТВО ЗДРАВЉА QUESTIONS