drgs: are hospitals paid for what they do – or do they do for...

DRGs: Are hospitals paid

for what they do – or do

they do for what they are

paid? And why patients

should care about it

Reinhard Busse, Prof. Dr. med. MPH FFPHDepartment of Health Care Management

Berlin University of Technology/

(WHO Collaborating Centre for Health Systems Research and Management)

European Observatory on Health Systems and Policies

1Are hospitals paid for what they do - or do they do for what they are paid?21 October 2014

A policy question in the 6th EU Framework Programme:

Why do costs of health services differ among EU countries at

the micro level?

How I got interested in the topic (2002)

£5,000

£6,000

£7,000

£8,000

£9,000

NHS

2

£0

£1,000

£2,000

£3,000

£4,000

£5,000

Cataract Hip Knee

UK private

France

The first nine patients sent to

France by the English NHS

(not shown: the 40 journalists

who accompanied them)

Are these data realistic?

Are they representative?

How can the differences be explained?21 October 2014 Are hospitals paid for what they do - or do they do for what they are paid?

Utilization of technologies/

involvement of different

professionals is to a large degree

driven by differences in severity

� need to standardise this if we

want to concentrate on other factors

patient variables

gender, age,

main diagnosis, other

diagnoses, severity

Why such differences?

3

medical and management

decision variables

mix and intensity of procedures,

technologies and human

resource use

e.g. size, teaching status;

urbanity; wage level

structural variables on

hospital/ regional/

national level

21 October 2014 Are hospitals paid for what they do - or do they do for what they are paid?

The HealthBasket Project (2004-2007)

• To identify and develop a methodology for cost comparison

• To assess whether prices are a good estimate of costs of

individual services

• To explore the reasons underlying variations in the costs of

individual servicesindividual services

Busse, R., Schreyögg, J. and Smith, P. (eds) (2008), “Special issue: Variability in health care treatment

costs amongst nine EU countries”, Health Economics, 17(S).

21 October 2014 4Are hospitals paid for what they do - or do they do for what they are paid?

Selection of vignettes

Need for care Age Type of Care ECHI

Appendectomy 14-25 M In-patient Surgery Emergency -

Normal delivery 25-34 F In-patient Obstetrics Elective +

Hip-replacement 65-75 F In-patient Surgery Elective +

• 10 case vignettes around different episodes of care,

taking different age groups, settings, specialties and

use of innovative technologies into account

Hip-replacement 65-75 F In-patient Surgery Elective +

Cataract 70-75 M Day case Surgery Elective +

Stroke 60-70 F In-patient Medical Emergency +

AMI (PTCA) 50-60 M In-patient Medical Emergency +

Cough ~ 2 M Out-patient Paediatrics/GP Emergency -

Colonoscopy 55-70 M Out-patient Diagnostic Elective +

Tooth filling ~ 12 Out-patient Dental Emergency +

Physiotherapy (knee) 25-35 M Out-patient Rehabilitative - -

521 October 2014 Are hospitals paid for what they do - or do they for what they are paid?

An example vignette: Hip replacement

Female, 65-75 years old, with hip osteoarthritis

requiring hip replacement because of

considerable impairment is finally (after

waiting time if normal in the hospital) admitted for

her first hip replacement (one side).

The patient is without co-morbidity (i.e. expensive drugs

due to treating co-morbidity should be

(= standardisedseverity)

due to treating co-morbidity should be

excluded), the surgeon uses the most

frequently used implant for female patients; the

operation is without severe complications

End of case vignette: discharge (home or

to separate rehabilitation institution).

6

(= standardisedoutcome)

21 October 2014

(= average, vignette-specific process)

Are hospitals paid for what they do - or do they do for what they are paid?

Busse, R., Schreyögg, J. and Smith, P. (eds) (2008), “Special issue: Variability in

health care treatment costs amongst nine EU countries”, Health Economics, 17(S).

Results: costs per patient and country(self-collected with uniform data sheet)

Hip replacement

7Are hospitals paid for what they do - or do they for what they are paid?21 October 2014



6000

8000

10000

12000

Re

imb

urs

em

en

t (E

uro

s)

“Profit“-making plausible through comparatively low case complexity

Results: avg. costs and reimbursement

per hospital and country Hip replacement

0

2000

4000

6000

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Total cost (Euros)

Re

imb

urs

em

en

t (E

uro

s)

Denmark

England

France

Germany

Hungary

Italy

Netherlands

Poland

Spain




5916,455599,30

7450,22

5369,53

8282,36

6225,55

7616,89

9374,21

6000,00

7000,00

8000,00

9000,00

10000,00in €Acute myocardial infarction

395,97

1025,76

1861,02

2465,32

2866,36

5013,64

308,88592,15

2236,40

2868,16

483,05

1415,79

2541,8452733,38

1181,531282,55

3720,88

4384,724161,15

0,00

1000,00

2000,00

3000,00

4000,00

5000,00

Hungary

(N=2)

Poland

(N=5)

Spain

(N=5)

Denmark

(N=3)

Germany

(N=13)

England

(N=3)

France

(N=3)

Netherlands

(N=6)

Italy

(N=5)


5916,455599,30

7450,22

5369,53

8282,36

6225,55

7616,89

9374,21

6000,00

7000,00

8000,00

9000,00

10000,00in €Acute myocardial infarction

patient variables

medical and management

decision variables

gender, age,


diagnoses, severity


395,97

1025,76

1861,02

2465,32

2866,36

5013,64

308,88592,15

2236,40

2868,16

483,05

1415,79

2541,8452733,38

1181,531282,55

3720,88

4384,724161,15

0,00

1000,00

2000,00

3000,00

4000,00

5000,00

Hungary

(N=2)

Poland

(N=5)

Spain

(N=5)

Denmark

(N=3)

Germany

(N=13)

England

(N=3)

France

(N=3)

Netherlands

(N=6)

Italy

(N=5)

1010



resource use




hospital/ regional/

national level


Acute myocardial infarction

11Are hospitals paid for what they do - or do they for what they are paid?21 October 2014



Acute myocardial infarction

12



Are hospitals paid for what they do - or do they for what they are paid?21 October 2014

EuroDRG Project (2009-2011)

Investigated patient level data of

10 episodes of care (representing

different medical specialties and

diagnostic/ therapeutic procedures)

across 12 European countries

(1) analysing criteria to group patients and

effects on reimbursement,

(2) identifying correlation between criteria (2) identifying correlation between criteria

and resulting groups and costs*,

(3) examining hospital efficiency within and

across countries*,

(4) identifying factors that affect the

relationship between the costs and

quality of care

* Busse R, Geissler A, Mason A, Or Z, Scheller-Kreinsen D, Street A

(2012) Diagnosis-Related Groups in Europe (EuroDRG): Do they

explain variation in hospital costs and length of stay across patients

and hospitals? Health Economics, Volume 21 (Supplement 2)


patient variablesmedical and management

decision variables

gender, age,


diagnoses, severity



resource use

Understanding the role of the 3 factors

in cost differences and price setting (1)

Group of patients with

homogenous resource

consumption

= DRG “unbundled” services,

innovative

technologies ...



decision variables

gender, age,


diagnoses, severity



resource use



cost weight=DRG

reimbursement

additional payments

+

adjusted for actual

costs/ length of stay



decision variables

gender, age,


diagnoses, severity



resource use




hospital/ regional/

national level



possibly adjusted

for quality

cost weight=DRG

reimbursementbase rateX

additional payments

+

adjusted for actual

costs/ length of staypossibly adjusted for

quality


Type of

adjustmentMechanism Examples

Hospital

based

• Payment for entire hospital activity is

adjusted upwards or downwards by a

certain percentage

• Hospital receives an additional

payment unrelated to activity

• Predefined quality results are met/not met (e.g., in

England)

• Overall readmission rate is below/above average or

below/above agreed target (e.g., in the United States)

• Hospitals install new quality improvement measures

(e.g., in France)

• Payment for all patients with a certain

DRG (or a disease entity) is adjusted • Insurers negotiate with hospitals that DRG payment is

higher/lower if certain quality standards are met/not

Possible adjustments for quality

21 October 2014 Are hospitals paid for what they do - or do they do for what they are paid? 17

DRG/

disease

based

DRG (or a disease entity) is adjusted

upwards or downwards by a certain

percentage

• DRG payment is not based on average

costs but is awarded to those hospitals

delivering ‘good quality’

higher/lower if certain quality standards are met/not

met (e.g., in Germany and the Netherlands)

• DRG payment for all hospitals is based on ‘best practice’;

that is, costs incurred by efficient, high-quality hospitals

(e.g., in England)

Patient

based

• Payment for an individual patient is

adjusted upwards or downwards by a

certain amount

• No payment is made for a case

• Certain readmissions within 30 days are not paid

separately but as part of the original admission (e.g., in

England and Germany)

• Complications (that is, certain conditions that were not

present upon admission) cannot be used to classify

patients into DRGs that are weighted more heavily (e.g.,

in the United States)


decision variables

gender, age,


diagnoses, severity



resource use




hospital/ regional/

national level

Just think about our usual assumptions …

possibly adjusted

for qualitypossibly adjusted for

quality


“If hospitals react on these

variables, it’s upcoding,

dumping, cream-skimming

… in any case, bad!”

“Of course, hospitals should

only behave in the interest of

the patient – no gaming,

please!”

“Higher costs are totally

justifiable and to the

patients’ benefit!”

“Hospitals should respond to these incentives

and we expect that they improve their quality!”

How many DRGs (system-wide)?

21 October 2014 19Are hospitals paid for what they do - or do they do for what they are paid?Busse R et al. BMJ 2013

Basic characteristics of

Patient classification systems in Europe

France

EnglandGermany

Poland

Austria

AP-DRG AR-DRG G-DRG GHM NordDRG HRG JGP LKF DBC

DRGs / DRG-like groups 679 665 1,200 2,297 794 1,389 518 979 ≈30,000

MDCs / Chapters 25 24 26 28 28 23 16 - -

Partitions 2 3 3 4 2 2* 2* 2* -

Are hospitals paid for what they do - or do they do for what they are paid?21 October 2014 20

Poland

Basic characteristics of

Patient classification systems in Europe

France

EnglandGermany

Poland

Austria

AP-DRG AR-DRG G-DRG GHM NordDRG HRG JGP LKF DBC

DRGs / DRG-like groups 679 665 1,200 2,297 794 1,389 518 979 ≈30,000

MDCs / Chapters 25 24 26 28 28 23 16 - -

Partitions 2 3 3 4 2 2* 2* 2* -

Are hospitals paid for what they do - or do they do for what they are paid?21 October 2014 21

Poland

Finland - THL England - CHE Austria - MSIG Netherlands - iBMG Poland - NHF Spain - IMAS Germany - TUB Sweden - CPK

EoC and related questionsRecommended for inclusion?

(yes/no)

Recommended for inclusion?

(yes/no)


(yes/no)


(yes/no)

Can you differentiate the

following items?

(yes/no)

RemarksRecommended for inclusion?

(yes/no)


(yes/no)


(yes/no)


(yes/no)

1. Breast cancer

Types of carcinoma (invasive and not invasive) no NO - CANNOT IDENTIFY DISEASE STAGE,

SO COMPARABILITY PROBLEMATIC

yes, however we should explicitly in- or exclude

certain treatments.

We could have a clear picture of breast cancer.

Yes

ICD10

YES yes, but cannot identify disease stage

yes

Stages of the disease (TNM, IUCC …), grade of the disease (G1-G4)

No

Protein and gene expression status (oestrogen receptor (ER),

progesterone receptor (PR) and HER2/neu proteins)

No

Types of treatment: surgery, radiation, hormone immune and

chemotherapyYes

excluding hormone immune

Types of surgery: tumourectomy, mastectomy - with or without

lymph-adenectomy and reconstruction

Yes

ICD9

2. Colorectal cancer

Location of the cancer, i.e. in the colon (possibly further specified),

rectum and caecum

no NO - CANNOT IDENTIFY DISEASE STAGE,

SO COMPARABILITY PROBLEMATIC

yes, but a detailed definition is required We could have a clear picture of colorectal cancer.

However, we can not identify patients who had both

surgery and chemotherapy. Yes

ICD10

YES yes, but cannot identify disease stage

yes

Stages of the cancer (TNM, IUCC, Dukes classification …), grade of

the disease (G1-G4)No

Types of treatment: surgery, radiation, chemotherapy

Yes

ICD9

Extent of surgery (both within colon/ rectum and other organs)

Yes

ICD9

3. Diabetes mellitus

Types of diabetes (type 1 and type 2) yes,

although is complicated

NO yes It is rather difficult to get a clear picture of diabetes

mellitus, predominantly owing to the many

departments involved and the inability to link them.Yes

YES yes

yes

Reason for admission (e.g. hyperglycaemic or hypoglycaemic

shock; other complications), Yes

Procedures related to the main diagnosis diabetes (e.g.

amputation)Yes

4. Acute myocardial infarction (AMI)

Type of acute myocardial infarction (both ST-elevated MI [STEMI]

and non-ST-elevated MI [NSTEMI])

yes YES yes We could have a clear picture of acute myocardial

infarction, except when it comes to CABG procedures.Yes

YES yes

yes

Treatment (PTCA, stent, CABG/bypass)

Yes

ICD9

5. Percutaneous coronary interventions (PCI)

Indications for PCI yes,

requires exact definition of procedure

codes in order to secure comparability

between countries

YES yes We could have a clear picture of PCI procedures.

However, the number of diagnosis-codes may turn

out to be too extensive/ complex to work with.

YesNO or maybe we think about redefining

parameters of the episode

yes

yes

Treatment (PTCA, stent)Yes

ICD9

Location of intervention (number of vessels treated, affected

coronary artery, bifurcation …)Yes

ICD9

Details of stent (bare metal vs. drug-eluting; number of stents,

affected coronary artery, type of drug on DES …)

Yes

ICD9

6. Coronary artery bypass graft surgery (CABG)

Indications for CABG yes,

requires exact definition of procedure

codes in order to secure comparability

between countries

YES yes We could have a clear picture of CABG procedures.

However, we can not distinguish the underlying

diagnoses (such as acute myocardial infarction).

YesNO or maybe we think about redefining

parameters of the episode

yes, but some difficulties

Grafting of both types of blood vessels: arteries and veins

No

Type of surgery: with the usage of cardiopulmonary bypass or so-

called ‘off-pump’ surgery

Selected episodes of care:

• Appendectomy

• Cholecystectomy

• AMI

• Bypass (CABG)

• Stroke

• Inguinal hernia

• Hip replacement

• Knee replacement

22

yes

called ‘off-pump’ surgery

Yes

7. Stroke

Cause (due to ischemia (thrombosis or embolism) or

haemorrhage)

yes YES yes We could have a clear picture of stroke.

Yes

ICD10

YES yes

yes

Treatment settings (ICU, stroke unit or medical/ neurological

ward) Yes

Rehabilitation within operating hospital or associated settings (vs.

rehabilitation after transfer, i.e. after end of episode)

No

8. Community-acquired pneumonia

Hospital-acquired pneumonia (nosocomial) (e.g. by special code or

”present on admission“ code)

no NO yes It is rather difficult to get a clear picture of

community-acquired pneumonia, because we can not

distinguish between hospital and community-acquired

pneumonia.

No

yes, but no information on type of antibiotics used

for treatment

Treatment settings (ICU or medical ward)

No

Type of treatment (especially antibiotics)

No

9. Inguinal hernia repair

Type of inguinal hernia (bilateral – unilateral, direct – indirect) yes YES yes, should we define a minimal age? It is rather difficult to get a clear picture of inguinal

hernia repair, because we can not distinguish

between hernia femoralis and inguinalis. Yes

YES yes but not possible to identify direct/indirect

yes

Type of surgical repair (with or without graft or prosthesis

implant)Yes

Treatment setting (inpatient, outpatient)

Yes

inpatient only

10. Appendectomy

Type of surgery (laparoscopic or open) yes YES yes We could have a clear picture of appendectomy.

Yes

YES yes

yes


Yes

inpatient only

11. Cholecystectomy

Type of surgery (laparoscopic or open) yes YES yes It is rather difficult to get a clear picture of

cholecystectomy. However, we could have a clear

picture of cholecystitis.Yes

YES yes

yes


Yes

inpatient only

12. Hip replacement

Indication (osteoarthritis, other types of arthritis, protrusio

acetabuli, avascular necrosis, hip fractures and benign and

malignant bone tumours)

yes YES yes We could have a clear picture of hip replacement.

However, we can not always distinguish the

underlying diagnoses.

Yes

ICD10

YES yes, but difficult to know numbers for

rehabilitation

yes

Type of replacement (e.g. hemiprosthesis, total endoprosthesis,

resurfacing)Yes

Type of surgery (cemented, cementless and hybrid prosthesis)

Yes

First replacement vs. revisionYes

Rehabilitation within operating hospital or associated settings (vs.

rehabilitation after transfer, i.e. after end of episode)

No

• Knee replacement

• Breast cancer

• Childbirth

Dropped:

• Colorectal cancer

• Diabetes

• Com.-acq. Pneumonia

• Urolithiasis

• Traumatic brain injury

Are hospitals paid for what they do - or do they do for what they are paid?21 October 2014

How many patient records did we use?


How many DRGs exist per episode?


21 October 2014 25

How wide is the price variation?

Are hospitals paid for what they do - or do they do for what they are paid?Busse R et al. BMJ 2013

Size of bubble:

number of DRGs

Range:

14x

28x

2x

2.5x 2.5x

60x

16 10

21 October 2014 26

Range:

DRG weights

(index case = 1)1x

1.1x 1.5x

60x

30x

1.5x

1.7x

5x

3.4x

14

10

10 10

Busse R et al. BMJ 2013

Are hospitals paid for what they do - or do they do for what they

are paid?

To become even

more specific,

definition of

AMI index case

and 6 other

vignettes

1 & 2:not invasive(1 = death)

3 - 6:invasive

21 October 2014Are hospitals paid for what they do - or do they do for what they

are paid?27

invasive(3 & 5 = BMS,4 & 6 = DES,6 = death)

Quentin W et al. Eur Heart J 2013

€ 2601 € 4533

€ 2189 € 1837

AMI: relative DRG payments I (index case = 1)

16% receive stents

57% receive stents

21 October 2014 28

€ 2926 € 7933


Qu

en

tin

W e

t a

l. E

ur

He

art

J 2

01

3

€ 4493 € 2981

€ 2189

AMI: relative DRG payments II (index case = 1)

21 October 2014 29

€ 960 € 420


Qu

en

tin

W e

t a

l. E

ur

He

art

J 2

01

3

Stroke episode:

index case & six case vignettes


Peltola M & Quentin W Cerebrovasc Dis 2013

Stroke episode: classification criteria

Candidates:

• Age

• Primary diagnosis (stroke or infarction vs. bleeding …)

• Secondary diagnoses/ comorbidities/ complications

• Procedures (e.g. systemic thromboloysis)

• Death/ time of death


• Death/ time of death

• Length-of-stay

• Use of stroke unit

Stroke episode: classification criteria

ENG

EST

21 October 2014 32

GER


are paid?

Stroke episode: resulting reimbursement

Thrombolysis& >7 daysStroke

unit

Secondarydiagnoses

Thrombo-lysis

Secondarydiagnoses

Death

21 October 2014 33

Day care

diagnosesdiagnoses


Peltola M & Quentin W Cerebrovasc Dis 2013

Breast cancer episode: classification criteria

Only one variable (total mastectomy) that all countries use!


are paid?3421 October 2014 34Are hospitals paid for what they do - or do they for what they are paid?

Only one variable (total mastectomy) that all countries use!

Scheller-Kreinsen D Health Econ 2012

Breast cancer episode: reimbursement(index case [partial mastectomy w/o complications] = 1)


35

Breast cancer episode: reimbursement(index case [partial mastectomy w/o complications] = 1)

Patients 3 and 5: with

reconstruction – significant

cost driver in most

countries (done in DE 16%,

AT 4%, EE 2%)


36

Patient 4: Complication wound

infection – costly especialy in Spain

(in ES 0.3%, AT 0.2%, DE 0.8%)

Patient 2: Complications

diabetes, cardiomyopathy, stroke

(high Charlson EE 1%, DE 10%)

21 October 2014 37

How good is the DRG system in explaining cost differences?

Are hospitals paid for what they do - or do they do for what they are paid?Busse R et al. BMJ 2013

How good are the DRG systems

in explaining actual cost differences (R2)?

Dependent variable: costs (individual patients)Dependent variable:

length-of-stay(no individual cost data)

10 102 2 5 8 6 5 7 2

6 44 3 4 43 3 3 2

16 107 6 6 7 6 6 6

15 144 6 5 43 3 5 3

21 October 2014 38

6 8

8 3

7

6 6

6

7

5

6

4

7

Busse R, Geissler A, Mason A, Or Z, Scheller-Kreinsen D, Street A (2012)

Diagnosis-Related Groups in Europe (EuroDRG): Do they explain variation

in hospital costs and length of stay across patients and hospitals?

Health Economics, Volume 21 (Supplement 2)

2 3 2

4 3 5 3


15 144 6 5 43 3 5 3

5 64 3 3 22 5 4 6

5 84 3 6 34 3 3 2

7 77 7 7 76 3 3 4

10 914 2 3 22 8 3 6

The more DRGs not necessarily the better

� devil is in detail (e.g. split criteria, variation in valuation)

Usage of such data: cost benchmarking

Hospitals with higher

21 October 2014 39

Hospitals with higher

than explainable costs

(by patient variables)

Hospitals with lower

than explainable costs

(by patient variables)


Peltola M Health Econ 2012

.95

11

.05

1.1

1.1

5co

st

Cost and survival of stroke patients in 94 European hospitalsC +

40

.85

.9

-.1 -.05 0 .05 .1survival

FINLAND FRANCE

GERNANY SPAIN

SWEDEN

Q – Q +

C –

Usage of such data:

combining cost and

quality data21 October 2014


are paid?

In conclusion …

Are hospitals paid for what they do …

• This is the intention, but cost explanation power of DRGs is quite

weak on individual level – and more DRG groups are not necessarily

better.

• Why are classification criteria so different across countries if effects

on costs are often similar? Is this due to clinician or hospital

lobbying?

– or do they do for what they are paid?

• For certain indications, this seems to be the case

� negative in classical view but possibly promising for pay-for-

quality (hospitals do react to financial incentives!) …

And why patients should care about it

• Whether hospitals think of the patients‘s health or their own

financial well-being can make a big difference – let‘s put this firmly

on our agenda!


www.eurodrg.eu

Slides at: www.mig.tu-berlin.de


are paid?42

drgs: are hospitals paid for what they do – or do they do for...

Documents