Diagnosis related groups and funding of an episode of care

1. Diagnosis related groups and funding of an episode of care Ric Marshall 1415 - 1500 5Dec11

2. HOSPITAL BUDGET MODELLING IN A DRG ENVIRONMENT

3. http://www.health.vic.gov.au/pfg/pfg2005/pfg0506.pdf

4. MODELLED BUDGETS EXAMPLE

5. Inpatient budget estimates • inpatient budget/expenditure estimates • Total hosptial budget for period • Multiplied by IFRAC • HOSPITAL EXPENDITURES AND IFRACS.xlsx

6. The modelling process • Inpatient budgets by hospital • Inpatient volumes by DRG by hospital • Cost weights by DRG • Price from total inpatient budget • IF COSTWEIGHTS ARE REBASED • Allocate modelled budget by weighted DRGs • Adjust for redistributions above 5% • JUL AUG DRG DATA MODEL IT2.xlsx

7. Initial modelling framework demonstration

8. GENERAL CHECKS/CORRECTIONS • Alignment of expenditure data and activity data • Cleaning up data by deleting test hospitals data • Aggregations of clinics to best approximate a major teaching hospital for benchmarking purposes. • Rechecking estimated IFRACS. • Rechecking grouping patterns of hospitals • Review grouper logic • Compare hospital level casemix patterns with peer hospitals • Check changes in casemix across time periods.

9. SPECIFIC CORRECTIONS • CHECK FOR MISSING DATA Hosp A HosP B • CHECK FOR MISSING EXPENDITURE DATA • ALLOCATE CLINICS TO HOSPITALS?? OR MODEL BUDGETS INDEPENDENTLY?? • CHECK Hosp X FOR OVERCOUNTING OF CASES OR UNDERESTIMATE OF CURRENT REVENUE. • ??DUPLICATE DATA • ??ADMITTED OUTPATIENTS • IFRAC • CHECK HospY AND HospZ FOR WHEREABOUTS OF REVENUE AND ??CASES

10. Managing demand for hospital services • Demand is very elastic. Michael Jackson • What is the right amount? • Is more better? Prevention investment? • Targets, incentives to substitution or both? • Engaging community education • Referral gatekeeper – copayments (equity) • Budgetary restraint a weak signal.

11. Target setting • Based on projection or current baseline • Same as last year’s targets • Same as last year’s actuals • Adjustment for growth • Adjustment for efficiency dividend • Planned service implementation – geographical redistribution • New services and technology allowance

12. Innovation, research and development • Cannot be covered by DRG weights based on previous year’s costings. • Must be covered by funding supplementation – then becomes absorbed in DRG costs. • Low volume high cost exceptional services OK for DRG funding if accurately costed • Usually high fixed costs relatively low variable.

13. Data sets required for DRG funding of hospital services • Activity • Data set specification • Coding rules– counting rules– admission rules • Expenditure previous years’ – quarters’ • Standard chart of account - for patient costing • Cost disaggregation standard models. • Budget and planning estimates • Price lists

14. Hospital Information Systems Hospital Financial Data Cost Sheet -Allocation Statistics • Minimum Basic Data Set-DRG Data Entry Tool • Clinical Data, DRG • Resource Consumption Data (preparecostsheet) (analysis tool) (volumefile) (costfile) (CASES) Diagnosis and procedures Analysis Reports PICQ Software Combo Software Cost Reports Coding Analysis Reports Data Analysis Reports

15. REPORTING FEEDBACK • The key to • GOOD DATA • EFFICIENCY GAINS • PERFORMANCE IMPROVEMENT • The basis for rational planning • A primary mechanism to assess innovation and investment priorities.

16. Standard reports may include • Productivity • Complexity • Allocative efficiency • Technical efficiency • Coding Completeness • And various quality indicators • Outcome – Process • Some examples follow …

17. Productivity • Performance in total Weighted Episode (WEs) of all hospitals • Overall performance in total WEs against target by hospital • WEs by Major Diagnostic Categories (MDC) for Medical Diagnosis Related Group (DRGs) by hospital • WEs by MDC for Procedural DRGs by hospital • Top 10 increment DRG families by hospital • Top 10 decrement DRG families by hospital

18. Complexity • Casemix Index of Medical and Procedural DRGs of all hospitals • Casemix Index (CMI) by MDC by hospital • Average WEs per patient by MDC in by hospital • Average number of episodes per patient by MDC by hospital • Casemix – “1 Year On”

19. Allocative Efficiency • Percentage same day episodes by MDC of Medical and Procedural DRGs by hospital • Change in same day episodes of Ambulatory Medical DRGs • Percentage of episodes admitted via A&E Department by MDC by hospital

20. Technical Efficiency • Average Length of Stay (ALOS) of Medical & Procedural DRGs of all hospitals • Change in ALOS by MDC by hospital • Cost per weighted DRG by hospital

21. Coding Completeness • Percentage of total multi-day episodes for Medical and Procedural DRGs by severity level in all hospitals • Percentage of total multi-day episodes with Major Co-morbidities and Complication (MCC) by MDC for Medical DRGs by hospital • Percentage of total multi-day episodes with MCC by MDC for Procedural DRGs in all hospitals • Percentage of total multi-day episodes with MCC by MDC by hospital • WE / CMI by discharged specialty: 4-year trend analysis by hospital

22. DRGs – QUALITY AND SAFETY Terri.jackson@ualberta.ca

23. THE FIRST IDEA OF EFFICIENT PRICE • Data and information for fair and accurate costing and pricing (1) • What is efficient in terms of a reasonable price to pay? • what is the budget? – realistic quality? • Accuracy in costing – capital costs – sector differences – lumpy costs (eg redundancies)? • What about regional cost/salaries/inputs price variations? • Differences in packaging – eg include workup? • Scale of operation? • Equivalent developing models of care?

24. THE SECOND IDEA OF EFFICIENT PRICE • The Payment System – what are you actually paying for? HEALTH SYSTEM OPERATORS, REGIONS, HMOs NHIF MoH INSURERS PATIENT EMPLOYED PRACTITIONERS Drug, MD SUPPLIERS SUPPORT SERVICES MANUFACTURERS HOSPITALS, HEALTH CLINCS, PRACTITIONERS

25. Coding activity to DRGs • DRG grouper software online in PAS systems in hospitals • Immediate feedback on DRG effect of coding • Code finder functions for DRG • optimisation • Batch or individual record grouping • Patterns of activity by DRG • DRG pattern reporting and feedback loops

26. Tracking expenditure to DRGs

27. The fundamental of costing

28. Cost per case – bottom up

29. DRG based – top down

30. Australia National hospital cost data collection NATIONAL HOSPITAL COST DATA COLLECTION COST WEIGHTS FOR AR-DRG VERSION 5.1, Round 11 (2006-07)

31. NHCDC Reporting Standards http://www.health.gov.au/internet/main/publishing.nsf/Content/0FABA9D6DB24D7E8CA257712000C5D3C/$File/HospitalPatientCostingStandards_v1.1.pdf

32. Why do we need clinical costing? • Accurately value products – eg DRG’s for funding • Costweights for funding and payment • Activity analysis in weighted activity terms • Benchmark our hospital against others and over time • Properly manage performance – care profiles • Set achievement targets – ‘match the above average performers over the next two years’

33. Clinical Costing Standards Association