1. DRGs + Four Factors in Hospital Improvement
Joe Attokaren
HS 6000
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More Info on DRGs

2. Overview DRGs Problem Service Line Strategies
Demographic Considerations
Market Segmentation
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3. % of Health Care Expenditures
DRG History
Medicare: Enrolled Population and Expenditures 1967 and 1985
Year
Number of Enrollees
Expenditures
% of Health Care Expenditures
1967
19.5 million
$4.7 billion
9.20%
1985
31.1 million
$72.3 billion
16.90%
Two Main Factors for Rapid Growth in Expenditures
1. Market Induced Demand
2. Increasing Cost of Medical Technologies
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4. DRG History
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5. DRGs Classification System for reimbursement for hospitals
Inpatients Only
Organized into 25 MDC
Pays a predetermine lump sum amount
Encourages more cost-efficient management of medical care
546 Total DRGs
Diagnosis Related Groups (DRGs) are a classification system that is used as the basis to reimburse hospitals for inpatient services.
It also serves hospital needs for data management, reimbursement and comparability, benchmarking, and other types of research.
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6. DRGs Principal Diagnosis Complications and Comorbidities
Surgical Procedures
Age
Gender
Discharge Disposition
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7. Top 10 DRGs
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8. Calculating DRG Payment
DRG Payment = DRG Weight x Rate
DRG Weight = average resources used
Base Payment Rate
Labor Costs
Wage Index
Non Labor Costs
Cost of Living
Add-on
Disproportionate Share Hospital
Teaching Hospitals
Outlier Cases
Disproportionate Share Hospital – low income patients
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9. Example Cases DRG Calculator Payment Case Study Worksheet 4/19/2019 JA
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10. Importance of DRGs
Useful tool for managing inpatient quality measurements and operating costs
Creates an incentive for the hospitals to operate more efficiently and more profitably
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11. Problem
Hospitals are finding it harder to make good financial decisions and the DRG system can help address this issue and provide long last success for hospitals.
Service Line Strategies
Demographic Considerations
Market Segmentation
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12. DRG Claim Process
ICD-9 = International Classification of Diseases Ver 9
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13. Service Line Strategies
What Are The “Cash Cows?”
Cardiovascular
Orthopedic
Neurosciences
General Surgery
Annual Changes/Updates
Improve Profitable Lines
Reduce or Cease not so Profitable Lines
CMS adjusts DRG payments annually to relfect changes in hospital costs and changes in technology
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14. Service Line Strategies
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15. Service Line Strategies
Change needs to happen quickly
Well defined data parameters
Specific performance metrics
Well-defined managerial accountability
Benefits
Increase Quality of Service
Provide More Money
Increase Competition
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16. Demographic Considerations
Know Your Customers!
Surveys
Customers are Important for Volume
Volume is Important in reimbursements
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17. Market Segmentation What’s Your Niche? Find Where You Fit Examples
Community
Examples
Northside
Saint Joseph’s
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18. Summary
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19. Questions
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