BOOKS OF RtfiDIfGS - PAHO/WHO

- 36 -
Prsfact
DURING THE PAST DECADE, health care financing researchers have sought to
develop equitable methods to constrain the rate of increase in health care
expenditures. Tle ced l for a stccessfidt national Iiospital cost containment
program has been highlighted as a major step toward overall health care cost
containment and a comprehensive national health plan.
In early efforts to compare and control hospital costs, researchers calculated
product costs by unit of service, such as lab tests, rad;ology tests, or days of
routine heoel service. Several incentive schemes were devised to encourage
hospital effic iency and low unit cost. Experience has shown that focusing on unit
cost alone encourages increased length of stay and ancillary utilization and
argues that attenttioi shloutld ie li>ciisetd oni medlical-practice I);itterns.
Recently, much attention has been ftcused on the cost per patient stay or per
case treated. Shifting to a single hospital product required that techniques be
developed to adjuist for variations in hospitals' patient or case mix.
To group hospitals with a similar case mix, researchers hlave generally concentrated
on proxy measures, such as the mix of services or t:fcilities available in each
hospital. While these approaches are relatively easy to calculate, thféy normally
do not address either the extent or the use of a hospital's available services or
facilities.
What is required is a classification scheme that is both manageable in terms of
the number of case types defined and reasonable in terms of the variation in
resources needed to treat each case type. This should permit direct measurement
of a hospital's case mix.
The development of the Diagnosis-Related Groups (DRGs) represents a significant
step in case mix measurement and application for reimbursement purposes.
DRGs classitfy 383 types of cases encountered in the hospital acute-care
setting. Each DRG represents a class of patients requiring similar hospital
services. Since DRGs are medically meaningful, they help provide a common
basis for comparing cost effectiveness and quality of care delivered. DRGs also
have the potential to assist the ho.¿,ital administrator as he manages his institution
and communicates with the medical staff.
Many PSROs have already explored the use of DRGs to review length-of-stay
and treatment patterns. New York and Maryland have incorporated the DRG
concept into their hospital cost containment programs and both New Jersey and
Georgia ,tili soon be incorporating DRG methodologies in new hospital cost
containment programs. At the federal level, DRGs are being considered for
incorporation in new reimbursement procedures for acute care hospitals. Given
the current emphasis on hospital cost containment, the development of DRGs is
both an important and timely advancement of the health Ce,'e financing field.
JAMES M. KAPLE
Acting Director
Office of Research, Denmonstrations aund Statistics
Health Care Financing Administration
Department of Health, Education, and Welfare