BOOKS OF RtfiDIfGS - PAHO/WHO

CASE .MIX DEFINITION BY DRG
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overhead accoulnts lnot related to piatienit
care; 3) overhead accoumits related to patient
care; 4) hotel and other general services
accounts; 5) nursing accounts; and 6)
ancillary services accounts.
The DRGs currendy encompass otly tbhinpatient
population; hospital outpatient
costs are not included in the DRGs' costs.
Overhead accounits are costs incurred I)y
the hospital iii its general operation but are
either not related or only indirectly related
to the provision of patient care. Depreciation
and interest cliarges are examiiiples of
overhead costs that are not related to patient
care and therefore are not normally
included in the DRG costs. Other overhead
accounts such as hotisekeel>ing or
laundry are indirectly related to the provision
of patient care and are included in the
DRG cost. The definition of the overhead
accolnts that are considered as patientcaire-related
versus non-patient-carerelated
can vary, depending on the goal of
the case mix accontiting system. For
strictly internal mianageinent purposes it is
reasonable to include as patient-carerelated
the various administrative services.
However, ifthe case costs of a collection of
hospitais are to be compared, then the admninistrative
costs shoild not he included,
since administrative costs can vary greatly
across hospitais for reasons other than case
mix. The remaining 3 types of accounts are
all directly relatt:d t.. patient care and with
the addition of the outpatient account, are
referred to as the final cost centers. The
-'vices associated with these accounts can
he directly related to individual patients,
allowing the costs to be apportioned to
each patient.
The direct costs of each final cost center
and the portions of the cost of patientcare-related
overhead accounts allocated
to each final cost center (as determined by
a special alg!)rithiii) represent the total cost
of providing the services associated with
each final cost center. An allocation statistic
specific to each final cost center is used
as the basis ofapportioning the costs to the
MEDICAL C4#t:
patienits in each ofthe l)RCs. Forexm;niple ,
thile cost of nursing is allocated to patientt.
based on a DRC-specific per dieni nursing
weight which was derived through a study
of the amount of nursing time spent witih
patients in each DRG. Wl ile all of the alto.
cation statistics possess some defects, they
are designed to reflect more equitably the
(lauiitity of aut iínstitittitoni's resources coi.
sumed by the patients in each DRG. rTh,
end result of the DRG cost miodel is the
determination of the unit cost of treating
patients in each lI)IG.
5.3 Hospital Budgeting
The full case mix cost accouniting approach
has been applied to the budgetaryl
process in 2 test hospitais. In the initial
year, the unit costs (i.e., average cost per
patient) in each DRCG were determined. In
order to establish the following year's
budget, it was only necessary to project the
hospital's case mix and apply the appropriate
inflation factors. Deviations from the
budget due to case mix were immediately
detected and the diagnostic and service
areas experiencing significant deviations
fromn established unit costs were isolated.
The resulting unit costs in the test hospitais
typically varied across DR9s by more
than a hundredfold. The following DRGs
illustrate this cost variation.
DRG
127-Ischemi c heart
disease except
acute myocardial
intaretion with
shunt or other
major operation
187-Gastric and peptic
ulcer with
gastric reseetion
or other
major operation
with a secondary
diagnosis present
Tyupicl 1976i
Unit Cost
$9.934
7,362
F