1. DRG Workshop Belgrade, 18-22.November 2013. Diagnosis Related Groups and AR-DRGs - Introduction Prof Ric Marshall OAM The University of Sydney.

2. DRG Workshop Belgrade, 18-22.November 2013. QUESTIONS When asked to use DRGs people want to know. –What are DRGs? –What are DRGs useful for? People wanting to use DRGs usually have some purpose in mind. –How can DRGs help us to … ? What people who use them want to know about how they work – their limitations.

3. DRG Workshop Belgrade, 18-22.November 2013. PAYING FOR HEALTH SERVICES BASED ON ACTIVITY RATHER THAN EXPENDITURE The usual context:-

4. DRG Workshop Belgrade, 18-22.November 2013. WHY DRG’S? IF USED EFFECTIVELY 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

5. DRG Workshop Belgrade, 18-22.November 2013. 5 major product groups 18 major product subgroups DRGS

6. DRG Workshop Belgrade, 18-22.November 2013. 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

7. DRG Workshop Belgrade, 18-22.November 2013. THE 4 COMPONENTS OF A DRG FUNDING SYSTEM What is needed to fund a hospital system by DRG payments???

8. DRG Workshop Belgrade, 18-22.November 2013. 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

9. DRG Workshop Belgrade, 18-22.November 2013. 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 ? 1000+300=1300 ? 1000+300+400=1700 ? 1000+900+300+250+400=2850

10. DRG Workshop Belgrade, 18-22.November 2013. HOW MUCH DOES A DRG COST?

11. DRG Workshop Belgrade, 18-22.November 2013. Non-admitted Bonus fundin Quality fund incl materni Electiv surgery DRG paymentsTotal '000s000s'000s H181,301.512,228.970.008,361.72297,957.72585,935.59 H245,272.641,895.041,077.723,888.00220,373.13361,685.64 H386,143.273,193.91538.772,666.70383,295.22697,197.03 H415.590.00 28,834.54 H572,649.316,687.102,933.153,241.23393,193.11604,858.67 H676,254.002,228.970.003,205.65340,554.13586,677.36 H736,699.670.003,495.020.00159,497.49222,322.82 H837,914.002,228.971,264.22684.00166,836.32302,242.38 H934,588.242,228.971,338.301,445.21215,701.91352,410.69 H1016,127.650.00 73,333.68170,508.49 etc Total890,120.3236,627.0521,083.6546,837.053,735,355.306,447,229.99 Component 3: MODELLED BUDGETS EXAMPLE

12. DRG Workshop Belgrade, 18-22.November 2013. Component 4: How do you change funding method? Phasing –Transition strategy –Initial steps Policy design Consensus Modelling and demonstration

13. DRG Workshop Belgrade, 18-22.November 2013. DRGs Implementation Germany

14. DRG Workshop Belgrade, 18-22.November 2013. HEALTHCARE SYSTEM OUTPUTS RATHER THAN INPUTS

15. DRG Workshop Belgrade, 18-22.November 2013. How does your garden grow?

16. DRG Workshop Belgrade, 18-22.November 2013. DO BUDGET ALLOCATIONS AFFECT HOSPITAL EXPENDITURE?

17. DRG Workshop Belgrade, 18-22.November 2013. 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).

18. DRG Workshop Belgrade, 18-22.November 2013. Provider Payment Methods ITEMISED BILLING – “Fee for Service” BUNDLED BILLING – “Per episode” CAPITATION FUNDING – “Per patient” GLOBAL BUDGETS – “Historic plus”

19. DRG Workshop Belgrade, 18-22.November 2013. 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 greatest quantity of treatment

20. DRG Workshop Belgrade, 18-22.November 2013. 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

21. DRG Workshop Belgrade, 18-22.November 2013. 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.

22. DRG Workshop Belgrade, 18-22.November 2013. THE IDEA OF THE DIAGNOSIS RELATED GROUP

23. DRG Workshop Belgrade, 18-22.November 2013. 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1990 1989 1988 1987

24. DRG Workshop Belgrade, 18-22.November 2013. AR-DRG Major Diagnostic Category Version 5.2 Version 6.0 Version 6.x PreMajor procedures - principal diagnosis associated with any MDC 1217 1Diseases and disorders of the nervous system 5361 2Diseases and disorders of the eye 2019 3Diseases and disorders of the ear, nose, mouth and throat 2827 4Diseases and disorders of the respiratory system 4247 5Diseases and disorders of the circulatory system 6780 6Diseases and disorders of the digestive system 5246 7Diseases and disorders of the digestive system 5246 7Diseases and disorders of the hepatobiliary system and pancreas 2928 8Diseases and disorders of the musculoskeletal system and connective tissue 7983 9Diseases and disorders of the skin, subcutaneous tissue and breast 293436 10Endocrine, nutritional and metabolic diseases and disorders 1928 11Diseases and disorders of the kidney and urinary trac 37 12Diseases and disorders of the male reproductive system 1916 13Diseases and disorders of the female reproductive system 2018 14Pregnancy, childbirth and the puerperium 171419 15Newborns and other neonates 25 16 Diseases and disorders of the blood and blood forming organs and immunological disorders 1099 17Neoplastic disorders (haematological and solid neoplasms) 18 Infectious and parasitic diseases 1718 19Mental diseases and disorders 131113 20Alcohol/drug use and alcohol/drug induced organic mental disorders 867 21Injuries, poisoning and toxic effects of drugs 2429 22Burns 888 23Factors influencing health status and other contacts with health services 13 Unrelated OR DRGs 033 Error DRGs 633 717744754

25. DRG Workshop Belgrade, 18-22.November 2013. So, in summary, DRGs:- Describe the number and type of patients – The Mix of cases – limited number of categories Resource homogeneity, Clinically 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

26. DRG Workshop Belgrade, 18-22.November 2013. QUESTIONS