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Tue 16 Sep 2008 04:00 AM

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Diagnosis-related pay

A new payment system for hospital care is ready to sweep the region with far reaching consequences for clinicians, healthcare providers and insurers. Medical Times looks at how the system will work and what the potential gains and pitfalls will be.

A new payment system for hospital care is ready to sweep the region with far reaching consequences for clinicians, healthcare providers and insurers. Medical Times looks at how the system will work and what the potential gains and pitfalls will be.

Imagine the scenario: patient X, a diabetic, arrives at an emergency department suffering from ketoacidosis and is admitted onto a general medical ward. He undergoes the appropriate tests, is prescribed the correct medications and makes a full recovery before being discharged home after a five-day stay.

How much should the hospital be paid for patient X's inpatient stay? Under the most basic payment system, currently in use throughout the Middle East, the answer is simple.

People need not fear DRGs. The question is, do you want to do something, or maintain the status quo and live in ignorance?

Healthcare providers are paid a flat fee for each care episode, with government and health insurers paying an agreed cost for whatever procedures are carried out.

Group mentality

However, a new system is in the process of being introduced by the health authorities of Abu Dhabi and Dubai, and is being considered by the Saudi Arabian government.

This more advanced payment scheme utilises Diagnosis Related Groups (DRGs) and sees healthcare providers paid an average sum per patient, in line with a pre-calculated cost for treating someone with the same diagnosis. It is already used in 30 countries across the world.

Under this scheme, patient X would be assigned a DRG rate for patients with a diagnosis of severe diabetes. The treating hospital would be paid the average amount required to care for such a person, including the costs of any necessary tests, drugs, and length of stay. Up to 1,000 DRGs will exist in any one system, providing a category for every patient episode.

 So, what are the benefits? According to Homer Warner, GCC business development manager for 3M Health Information Systems, DRGs will revolutionise health care in the region.

The system will deliver cost-savings, useful clinical data and highlight excellence, says Warner, who is working with Health Authority Abu Dhabi (HAAD) to introduce the scheme.

"There are good reasons why more than 30 of the world's wealthiest countries have moved away from a fee-for-service health care payment or reimbursement, to some form of DRG-type scheme. It has proved effective for driving efficiency," he claims.

 When DRGs were introduced to the US in 1983, to reimburse hospitals treating patients under the Medicare programme, the US government saved $18 billion in one year, according to a Rand Corporation study published in the 1980s.

Mix and match

The scheme will also allow health authorities and insurers to track, for the first time, exactly who hospitals are treating, their case-mix, and exactly what their medical dollars are paying for. This is because the system relies on accurate data collection from the medical records, which is fed into a DRG computer software package to determine pay.

"If I want to know what my production really is, that comes down to case mix -  who I am treating - and DRGs provide comparative reporting on that. It is cost-effective and cuts out a lot of the waste," Warner explains.

DRGs can only be introduced, however, once two other initiatives are in place. The first is an integrated IT system that uses a standard language to describe clinical events.

This allows healthcare providers, insurers and health authorities to ‘talk' to each other, and understand each other's data, says Dr Finn Goldner, head of health system financing at HAAD.

The authority is midway through its DRG implementation and is hoping to go live in a few months time. However, hospitals must be capable of electronic billing first.

"It needs a proper IT process that relies on those standards. Now we speak the same language they can talk to us and talk between themselves," Dr Goldner explains.

On the record

The second initiative impacts directly on clinicians, and that is the need for highly accurate medical records; a skill which hospitals will need to provide training for, says Professor Stan Capp, CEO of Sharjah Teaching Hospital. Prof Capp was finance director for the Department of Health in Victoria, Australia, when its DRG system was first introduced in 1993.

"One of the critical factors of DRGs is detail in the medical records, this is an important element," he notes. "So, in the training you need to teach your medical staff and clinicians to make sure everything is on the medical records."

Of course, once the information is collected it can be compared, and that's when clinical inconsistencies between individual doctors are unearthed. "They [the health authorities] do not want to penalise the good doctors," Warner reassures, "But they want to bring the doctors who are out of line in terms of clinical standards back on side."

Such data can also show variations between healthcare providers, revealing who is managing their patients cost-effectively and who isn't. "If they do less and the outcome is still good, then the [cost] benefit goes to the provider," notes Dr Goldner.

"If the outcome deteriorates then we will ask them questions as a health authority on a quality level; and as insurers on a payment level."

However, a big obstacle to the successful implementation of DRGs in the two emirates is the lack of people trained to work as ‘coders'; or staff who assign codes to information from medical records and enter it into the IT software.

"What it will mean for this country is a huge demand for healthcare information managers or ‘coders', and the better quality of these people the better outcome in terms of what value is assigned to the patient,'" warns Professor Capp.

Caution, he adds, should also be taken over the potential for hospitals to abuse the system. Patients can be admitted unnecessarily to secure extra payments, in a particularly underhand practice known as ‘gaming'.

Hospitals in Victoria did this by setting up admissions wards in emergency  departments so that on paper, patients  were admitted, but were not actually using  inpatient beds, Professor Capp reveals.

Another obstacle clincians may have to deal with is wrangling with managers over the right time to discharge patients, as DRGs are based on average length of stay. But Professor Capp believes these are theoretical, rather than real problems. "It would be a brave manager to go up to the ward and say, ‘This patient is being discharged,' against the treating doctor's wishes."

Primary protocols

The way to get round these problems is to set up a complimentary outpatient and primary care funding system to incentivise these sectors to offer as much preventative and active treatment as possible before having to admit patients to secondary care, advises Dr Goldner.

"Outpatients and primary care - it is very important to look at a system of payment and reimbursement scheme there, and the primary thing you need to do is look at adequate pay for doctors time." he notes.

It's clear that DRGs can offer much more than just a new payment tool. Used correctly, the system can drive efficiency, show up flaws and generate useful clinical data.

"People need not fear DRGs," concludes Warner. "The question is; do you want to do something - or maintain the status quo and live in ignorance?"

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