BOOKS OF RtfiDIfGS - PAHO/WHO

Vol. XVIII, No. 2, Sn",,phl- steal
112-Otitis miedia,
c.lroulic .'il.sto)iditis
or otosclerosis
withotut any
operation
273-False labor
.withoutt aliy op(eration
- 67 -
264
Even within a specitic diagnostic area
the DRGs provide a higlh degree of cost
discrimi ination. For exampi)le, paitietits with
a prinmiary diagnosis of urinary calcullus encompass
4 DRGs with the tollowing typical
1976 uinmit costs:
Urinanj Calculus DRGs
239-Without in oper-
2- a0 d y i agnou sis
240-IVitlhoutt an operatioin
witli a
s;ec( ¢{i;ir y
dia;lí)nsis
241-With miinor operation
sIuch ;is
cystoscopy or
cathettcr to
kiitdney
242-With maijor operaition
schlil as
nephrotoiny,
cystotoity or
r'reterotoiiy
Tilpical 1976
L!ni .:ost
$ 394
774
1,032
2,2)93
.ThL, , "en within this narrow diagnostic
; artea the unit costs across DRGs varied by a
factor of nearly 6.
: An exaniple of a munit cost report
' for DRG 121-Actute Myocardial lntiLrc-
;/tion-appears in Figure 4. It compares
the cost of treating AMI patients in
; the same hospital across 2 differenít years.
`; The box at the top of the report summainrizes
-: the length of stay, charges, antd costs ex-
· perienced by AMI patients in the 2-year
period. The bottom portion of the report
breaks down the costs experienced in
! terms of the final cost centers of that hospi-
. tal. For each item in the report both the
absolute and per cent change across the 2
CASE MIX ACCOUNTINC
years a.re indicated. Such a report allows a
hiospitail aininiistrator to isolate hoth the
diagn(ostic and service areas wilere there
are significant differences across years or
relative to other hospitals if comparable
data from other hospitals is available. Once
the potential problem areas have been
identified, the administrator can begin
a more ineaningftul dialogute with the
pIl)hysicians reslonsihle f)r the idenatified
patients and services.
5.4 Prospective Reimbursement
Traditionally, most health insurers have
reimbursed hospitals retrospectively on
the basis of reasonable and allowable costs.
While this model of reimbursement
guarantees coverage for nmost hospital expenditures,
it provides little economnic incentive
to hospitals to control costs. Hospital
prospeé.tivc-rei nlwrsement systems
establish the rate of hospital reimbursemenit
before the period over which the
rate is to apply. The rewards and penalties
inherent in a prospective systemn can
potentially provide the inotivation for
hospitals to become more cost effective
without sacrificing the quality of medical
cure. Under contract No. 600-77-022 from
the lHealth Care FinancingAtAdininistration,
the State of New Jersey is in the process
of inmoving from a per dicm reasonable-
'cost-based reimbursement system to a
cost-per-case incentive-based system. 2 '
The Standard Hospital Accounting and
Rate Evaluation (SHARE) system is the
per diemn cost-based reimburseiment systein
currently in use in New Jersey. Under
the SHARE system, costs are grouped into
31 cost centers according to uníi form definitions
of futictional centers such as laboratory,
rautiology adl the like. The iinpatient
costs are then regrouped within each cost
center into 3 basic categories: 1) nonplhysician-controlllale
costs; 2) physician
costs (e.g., physician and resident salaries
and ftes); ard 3) other costs which are
either not controllable by the hospital, or