BOOKS OF RtfiDIfGS - PAHO/WHO

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£.¡EDCAL CARE
ebrNuarV 1;980. Vol. .YVIII. No. 2, Supplement
5. Case Mix Accounting in Hospital Budgeting,
Cost Control and Prospective Reimbursement
5.1 Case Mix Accounting
.;N NItMPt .TANT OBJECTIVE of hospital costing
and budgetary systems is the uinder-
·standing anct control of hospital costs. In
traditional organizational setti ngs, cost
control is miost su¡cccssllI ill those sitiations
where well-e a
precise definition of the services provided
:by the institution. In a general sense, hospitais
provide "patient care, .lbut more
'specifically, they proviíde patient care of'
.various kinds and intensities over various
"durations based on the needs of the pa-
.tients treated.
Since the DRGs form a classification of
;the patient population into classes with
*!similar expected output utilization, they
can provide a definíition of the services
Yiprov.
'w:k )y a hospital. As such, they allow
t.he .esources consumed and costs incurred
;to be related directly to the types of patients
or case mix that the hospital
t'eats. 2 .8.B This is important in a hospital
setting, where it is not manageinent (i.e.,
administrators) but rather individual
physicians who are reasponsible tor allocating
resources through various services
mnd departments in order to provide effec-
:tive patient care. To a large extent, physi-
.*cians act independently of each other and
Yj'Ure not generally aware of tihe overall lib'nancial
implicatioxis oi their individual de-
`isio~t. If hospital cost control is to be attaineld,
effective communication between
the financial systems of the hospital and its
phys-cians must be achieved. By tobnulatitg
the hospital biudget in terms of patient
classes with similar piatterns of care. a direct
linkage hetweenx the practices ot' inividual
physiciians and the finaincial conseqcuences
for the hospital can be realized.
'rie goal, theni, of a caise mix amc:ounting
systemi is to provide a complete tfinancial
picture of the costs of treating specific
types of patients, whose care is the basic
service ofa hospital. Under the traditional
organizational structure of a hospital, there
is no department whose responsibility is to
insure that individuial patients are financially
well managed. Typically, the hospital's
2 accounting systemns-linancial and
managerial- deal with patients in the
aggregate and not on an individual basis.
The financial system provides the lbasic financial
description of the hospital in ternms
of the balance sheet, income statement and
ftinds flow, while the managerial accounting
system provides the financial information
oriented at the department level (e.g.
nursing, laboratory, medical records) for
internal nmnagement purposes. Thus,
hospitil accounting systems have not provided
the integrated picture of the financial
consequences of the care delivered to
individual patients that case mix accounting
is designed to produce.
5.2 DRG Cost Model
The process of determining the cost of
treating patients in each of the DRGs for an
individual hospital or collection of hospitals
is decribed elsewhere.? In summary,
the types of accounts in a hospital chart of
accounts can be categorized into 6 distinct
service areas: 1) outpatient accounts; 2)