Transcript IR-DRGs - eClaimLink

Computational Characteristics of Dubai’s
Inpatient IR-DRG Payment System
Michael Trisolini, PhD, MBA
Nicole Coomer, PhD
Mahmoud Taha, MSc, MBA
1
RTI International is a registered trademark and a trade name of Research Triangle Institute.
www.rti.org
Agenda
1.
2.
3.
4.
Background
Introduction to DRGs
Payment with Inpatient DRGs
Calculating DRG Parameters
a.
b.
c.
5.
6.
7.
8.
2
9.
Relative Weights (3M)
Base Rate
Outliers
Adjusting DRG Payments
Implementing DRGs
Sensitivity Analyses
Monitoring
Projected Timeline
DHA Project Overview
Phase I Timeline – February 2015 to July 2016
9
Planning Phase
• Current Situation Analysis
• Round Table Meeting
• Implementation Plan
Implementation
Planning
• Five-year Plan for 2016 to 2020
DHA Project Overview (cont.)
Phase II Timeline – August 2016 to July 2018
10
IR-DRGs
• Dubai Health Care Cost Index
• IR-DRG Parameters &
Implementation
Monitoring, Policy,
Training
• IR-DRG Monitoring Indicators
• Policy Briefs
• Training for DHA Staff
Five Year Blueprint for Phased Implementation
Step 1: Initial
IR-DRG
implementation and
operations
11
Step 2:
Enhancing
IR-DRG
implementation
Step 3:
Additional
payment
models
Implementation in phases promotes success for all stakeholders and
minimizes change fatigue by providing time for needed adjustments to
systems, staff, and operations.
Options for Bundling Inpatient Hospital Services
Hospital per service or perprocedure payment
Hospital per-day reimbursement
Hospital per-admission
reimbursement: diagnosis-related
groups (DRGs)
DRGs bundled with physician
reimbursement (Dubai IR-DRGs)
Paying for quality, pay for
performance (P4P), and valuebased purchasing (VBP)
Episode payments for hospital,
physician, and post-acute care for
an illness episode (often 90 days)
Capitated payment for all health
care services provided per patient
per year
6
Agenda
1.
2.
3.
4.
Background
Introduction to DRGs
Payment with Inpatient DRGs
Calculating DRG Parameters
a.
b.
c.
5.
6.
7.
8.
7
9.
Relative Weights (3M)
Base Rate
Outliers
Adjusting DRG Payments
Implementing DRGs
Sensitivity Analyses
Monitoring
Projected Timeline
Introduction to DRGs
8

Diagnosis-related groups (DRGs) bundle, or combine, inpatient
hospital services into a single group for each inpatient stay

The hospital services included in each DRG bundle represent the
typical services provided across all hospitals for patients with the
same reason for admission (principal diagnosis or complex
procedure)

Each inpatient hospital stay is assigned to one and only one DRG
based on the patient’s age, sex, diagnoses, procedures provided to
the patient, and sometimes other factors
What do DRGs Cover?
Types of services covered by a
DRG payment include:
9
•
•
•
•
•
•
•
•
•
•
Physician care
Nursing care
Technician services
Therapies
Radiology
Laboratory
Pharmaceuticals
Room
Meals
Etc.
Characteristics of DRGs
DRGs are:
 Cost homogenous
–

Clinically coherent, with similar clinical characteristics such as
organ system, etiology, or specialty

Mutually exclusive
–
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Patients in each DRG have similar patterns of hospital resource use, and
each DRG has one payment level
Each inpatient hospital stay is assigned to only one DRG
DRGs as Hospital Casemix Measurement
11

DRGs are a way of measuring the casemix or relative severity of
illness and cost of the different types of inpatient stays or “products”
provided by a hospital

DRGs adjust hospital prices and payments by measuring the
casemix of patients treated by a hospital

DRGs can group together different kinds of patients including
clinically similar ICD-10 diagnosis codes, as long as they are also
similar in cost or hospital resource use
DRGs as Hospital Casemix Measurement (cont.)
DRGs enable hospitals to be paid more if they treat sicker patients
(more severely ill casemix of patients), rather than being paid more
due to the reputation or “name” of the hospital

• Some DRG systems, including IR-DRGs, further sub-classify hospital
stays by the severity of the patient’s illness
–
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The reason is that higher severity of illness means higher costs to the
hospital which means higher payments are needed for the hospital
Severity Levels


13
IR-DRG Severity of Illness (SOI) Classifications – Based on
Secondary Diagnoses:
1)
Minor (1) – e.g., uncomplicated diabetes, difficulty breathing,
hypertrophy of kidney
2)
Moderate (2) – e.g., diabetes with renal complications,
emphysema, chronic renal failure
3)
Major (3) – e.g., diabetes with ketoacidosis, respiratory failure,
acute renal failure
These SOI levels turn 1 IR-DRG into 3 IR-DRGs with 3 different
payment levels depending on the patient’s severity of illness
History of DRGs

DRGs were first developed in the 1970s and first used for hospital payment
by the U.S. Medicare system in 1983 and are now used in many high income
countries
 A number of different DRG systems have been developed:
Original Yale DRGs (1970's)
Medicare HCFA/CMS DRGs (1983)
All Patient DRGs (AP-DRG)
Yale Refined DRGs (RDRGs)
3M APR DRGs
1970
1980
1990
2000
MS-DRGs
2010
Source: American Health Information Management Association. "Evolution of DRGs (Updated)." Journal of AHIMA (Updated April 2010)
14
Country-Specific DRGs
15

U.S. Medicare DRGs

U.S. All Payer DRGs

Swiss DRGs

Germany G-DRGs

NordDRGs – Scandinavia and Estonia

IR-DRGs – used in several countries and in the Emirate of Abu Dhabi,
and are planned for Dubai starting in 2017
Number of DRGs
16

The number of DRGs varies across the different DRG systems

The first DRG system used in the U.S. Medicare system had 476
DRGs

Some DRG systems now have over 1,000 DRGs, due to different
classification systems and splitting some DRGs by severity of illness
levels

Adding more DRGs increases specificity, but also increases the
complexity of the DRG system and the management resources
required to implement and maintain the DRG system
IR-DRGs

IR-DRGs were developed by the 3M company

Similar in concept to other DRG systems
–
IR-DRGs group each hospital stay into only one DRG for casemix
classification and payment purposes
– Same methods used for calculating DRG payment rates, including one
base rate and relative weights for each DRG
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IR-DRGs (cont.)

IR-DRGs are also somewhat different from other DRG systems in
several ways:
–
–
–
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Designed to encompass both inpatient and outpatient care, but can be
used for inpatient care only as in Abu Dhabi, and as also planned for Dubai
Based mainly on procedure codes rather than on diagnosis codes as in
other DRG systems
IR-DRGs can include three levels of severity of illness using the most
severe secondary diagnosis on the claim
Agenda
1.
2.
3.
4.
Background
Introduction to DRGs
Payment with Inpatient DRGs
Calculating DRG Parameters
a.
b.
c.
5.
6.
7.
8.
19
9.
Relative Weights (3M)
Base Rate
Outliers
Adjusting DRG Payments
Implementing DRGs
Sensitivity Analyses
Monitoring
Projected Timeline
Goals of DRG Payment

20
Goals of Bundling Services in DRGs for Hospital Inpatient Pricing and
Payment
–
Remove incentives for overtreatment or increasing volumes of care –
laboratory tests, radiology, length of stay (LOS) in hospital – that exist in
fee-for-service pricing and payment
–
Financial rewards for efficient hospitals providing care that is less costly
than the fixed DRG payment per inpatient stay
–
Shift risk for the costs of overtreatment to the hospital
–
Simplify hospital billing by reducing the number of units of service billed
Goals of DRG Payment (cont.)
21
–
Simplify utilization review and medical necessity review by health
insurance companies by reducing the number of units of service billed
–
Allows flexibility for adding on paying for quality incentives
–
Allows flexibility for negotiations on DRG prices between health insurance
companies and hospitals
–
Capital costs can be passed-through to avoid discouraging investors
–
Assist hospitals with internal planning and budgeting by defining the
“products” of the hospital
How is DRG Payment Determined?

At the most basic level the DRG payment is a multiplication of two
factors:
Base Rate
• An amount representing the
average payment per admission
for all hospitals in the base year.
• One base rate for all hospitals.
• Sometimes referred to as a
standardized amount
Relative Weight
• A unique relative weight is
assigned to each DRG to reflect
the average level of resources
for an average patient in a DRG,
relative to the average level of
resources for all patients.
DRG Payment = Base Rate x Relative Weight
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Calculating DRG Payments to Hospitals

Examples of calculating DRG payments based on the U.S. Medicare system:
Base Rate = $5,370
1)
Normal newborn birth (DRG 795)
Relative Weight = 0.1656
Payment = $5,370 x 0.1656 = $889
2)
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Heart transplant with Major Complications or Comorbidities
Relative Weight = 24.2794
Payment = $5,370 x 24.2794 = $130,380
Agenda
1.
2.
3.
Introduction to DRGs
Payment with Inpatient DRGs
Calculating DRG Parameters
Relative Weights (3M)
b. Base Rate
c. Outliers
a.
4.
5.
6.
7.
8.
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Adjusting DRG Payments
Implementing DRGs
Sensitivity Analyses
Monitoring
Projected Timeline
DRG Base Rate and Relative Weights
Terminology
Costs
Charges
Payments
• The amount that a hospital • The amount that a patient
• The amount that a
bills a patient or insurer for
or insurer pays to the
hospital expends to
hospital for providing care.
provide care for a patient. providing care.
• Typically greater than
costs.
• May or may not be
correlated to costs.
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• Typically greater than
costs and less than
charges.
DRG Base Rate and Relative Weights (cont.)

The DRG base rate and the relative weights for each DRG are
intended to reflect the costs of providing care
–

Using costs for calculating the parameters requires accurate and timely
cost reporting from hospitals to DHA to determine DRG level costs
In the absence of DRG level costs, the parameters can be based on
recent charges and fee-for-service hospital payments
–
Recent charges should reflect, in part, the resources needed to treat a
patient
– Recent fee-for-service payments should on average cover all of a
hospital’s costs
– A transition to costs can occur in the long term
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Calculating DRG Relative Weights
27

The IR-DRG relative weights for Dubai will be calculated by 3M

Relative weights are calculated as the average charges for cases in
each DRG divided by average charges for all cases
–
The relative weights are intended to account for cost variations between
DRGs that represent different types of patients and treatments (differences
in casemix)
–
The more costly DRGs, the DRGs for the more severely ill or complex
patients, are assigned higher DRG relative weights and thus receive higher
payments
Calculating DRG Relative Weights – An Example
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Case
DRG
Charges
Fee-for-Service
(FFS) Payment
1
001
12,000 AED
10,000 AED
2
001
14,000 AED
12,000 AED
3
001
17,000 AED
10,500 AED
4
001
13,500 AED
13,000 AED
5
002
20,500 AED
20,000 AED
6
002
28,000 AED
25,000 AED
7
002
19,000 AED
18,500 AED
8
002
23,000AED
22,500 AED
9
002
40,000 AED
23,500 AED
*For illustrative purposes only, values are hypothetical.
Calculating DRG Relative Weights – An Example (cont.)
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DRG
Number
of Cases
Total Charges
Total
Payments
(FFS)
Average
Charges
Average
Payments
(FFS)
001
4
56,500 AED
45,500 AED
14,125 AED
11,375 AED
002
5
130,500 AED
109,500 AED
26,100 AED
21,900 AED
Total
9
187,000 AED
155,000 AED
20,778 AED
17,222 AED
*For illustrative purposes only, values are hypothetical.
Calculating DRG Relative Weights – An Example (cont.)
DRG
Average
Charges
001
14,125 AED
14,125 AED
20,778 AED
=
0.68
002
26,100 AED
26,100 AED
20,778 AED
=
1.26
Relative Weight Formula
Relative Weight
Average Charges for All DRGs (001, 002) : 20,778 AED
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*For illustrative purposes only, values are hypothetical.
Updating DRG Relative Weights

The relative weights are adjusted or updated periodically (e.g. once
per year) to account for changes in hospital costs

Relative weights are updated using new charge data that becomes
available.
–

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Collected on the claims as done currently with FFS claims
Changes in relative charges reflect changes in the relative costs of
providing care.
DRG Base Rate and Relative Weights

The base rate is set equal to the total payments for inpatient cases
divided by the total number of inpatient cases for all hospitals
All DRGs (001, 002) FFS Payment
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Total
Number
of Cases
155,000 AED
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Average
155,000 AED
=17,222 AED
9
*For illustrative purposes only, values are hypothetical.
Base Rate
Calculating DRG Payments to Hospitals

Examples of calculating DRG payments based on hypothetical DRGs:
Base Rate = 17,222 AED
DRG
Relative
Weight
001
0.68
17,222 AED * 0.68
= 11,708 AED
002
1.26
17,222 AED x 1.26
= 21,634 AED
DRG Payment Formula
DRG Payment
DRG Payment = Base Rate x Relative Weight
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*For illustrative purposes only, values are hypothetical.
Updating the Base Rate
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
The base rate is adjusted or updated periodically (e.g. once per year) to
account for changes in hospital costs using an update factor

The update factor in its simplest form is a cost index
– A market basket index measures the changes in cost, over time, of the
same mix of goods and services purchased by hospitals
– These are prices paid by hospitals to suppliers of goods and services and
thus the costs to the hospitals
 Sometimes called a “price index”
 Sometimes called a “cost index”

DHA and DSC are establishing a healthcare cost index for Dubai
Updating the Base Rate - Example
Base Rate = 17,222 AED in Year 1
Update Factor = 3% for Year 2
Base Rate for Year 2
17,222 AED X 1.03
= 17,739 AED
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Outlier DRG Payment Adjustments
•
Outlier payments are extra payments to hospitals, above the regular
DRG payment, for hospital stays that incur unusually high costs
•
•
In a cost-based DRG system, to qualify for an outlier payment, a
hospital stay must have costs above a very high, fixed threshold cost
level
•
•
36
Rare occurrences
If this cost threshold is exceeded, then an extra payment is made to the
hospital at usually 80% of the amount by which the hospital’s costs exceed
the outlier threshold of cost for that DRG
In a non-cost-based DRG system length of stay is often used and a
per diem amount can be paid for each day beyond the outlier
threshold length of stay
Agenda
1.
2.
3.
4.
Background
Introduction to DRGs
Payment with Inpatient DRGs
Calculating DRG Parameters
a.
b.
c.
5.
6.
7.
8.
37
9.
Relative Weights (3M)
Base Rate
Outliers
Adjusting DRG Payments
Implementing DRGs
Sensitivity Analyses
Monitoring
Projected Timeline
Quality Adjustments to DRGs

DRG payments can be also be adjusted to increase payments or
decrease payments for measured quality of care levels
–
–
–
–
38
Can use a hospital’s scores on several individual quality measures
Can use an overall hospital quality score with scores on multiple quality measures
added together
An extra payment for high quality or payment penalty for low quality can be built
into the DRG payment model
Quality of care scores and payment adjustments can also be a tool for negotiation
between hospitals and health insurance companies
Quality Adjustments to DRGs – Examples
Germany – penalty for not submitting quality data
 France – extra payments for quality improvements (e.g. reducing MRSA
infections)
 England – up to 1.5% penalty if quality standards not met; no extra payment
if the patient is readmitted within 30 days
 U.S. Medicare
– Penalty for excess readmissions for acute myocardial infarctions, heart
failure, and pneumonia
– Value-based purchasing incentive for higher quality performance scores
– Penalty for hospital acquired conditions (HACs)
– Penalty for not using an electronic health record (EHR)

39
Paying for Quality Formula for Inpatient Payment

Prior to Pay for Quality the IR-DRG formula is:

Pay for Quality adds an additional multiplier:
α < 0 if the hospital has low quality (Q) relative to others, quality
adjustment decreases payment
– α = 0 if the hospital has average quality (Q) relative to others, no quality
adjustment
– α > 0 if the hospital has high quality (Q) relative to others, quality
adjustment increases payment
–
51
Paying for Quality Example
Range of
Possible Effects
of Quality on
Inpatient
Payment
BaseRate=8,000 AED, RelativeWeight=3.267
52
*For illustrative purposes only, values are hypothetical.
Negotiation and DRGs

Negotiation of DRG payments between hospitals and health
insurance companies is possible under a DRG system
–
–
–
–
Used in Abu Dhabi
Reduces the need to implement complex DRG payment adjustments and
some pass-throughs
Relative weights remain fixed
Different base rates are established for different hospitals through hospital
and health insurance company negotiations

42
Negotiations can be limited to a range of possible base rates by DHA
Negotiation Sensitivity Analyses

To assess the system for biases and understand the potential effects
of allowing a negotiation band on the Dubai health care system.

Conducted at the hospital, insurer, and healthcare sector levels

Using the EClaim Link data and the relative weights, base rate, and
outliers developed to reflect the unique system that exists in Dubai
–
Simulated negotiation in the market

All hospitals receive minimum payment in band
 All hospitals receive maximum payment in band
 Distribution of payments based on current ratio of payments to charges in the
EClaim Link data

53
Similar to sensitivity analyses discussed above
Agenda
1.
2.
3.
4.
Background
Introduction to DRGs
Payment with Inpatient DRGs
Calculating DRG Parameters
a.
b.
c.
5.
6.
7.
8.
44
9.
Relative Weights (3M)
Base Rate
Outliers
Adjusting DRG Payments
Implementing DRGs
Sensitivity Analyses
Monitoring
Projected Timeline
Implementing DRGs


ICD-10 and CPT coding – A DRG system crucially depends upon
accurate coding of inpatient hospital stays, so hospital coding needs
to be first reviewed and upgraded if needed
Standardizing terminology – Defining key measures of hospital use
and cost
–
It is important to define what constitutes an inpatient stay
– Is one overnight in the hospital required to define an inpatient stay?
– What about patients kept overnight for “observation”?
45
Implementing DRGs

Phase-in Transition Period – Experience other countries strongly
suggests a DRG transition period of 2-3 years or more.
–
–
–
–
46
Start with shadow budgeting -- Include DRGs on claims for information only and
not for payment for 9-18 months or more, while continuing fee-for-service
payment to hospitals
DRG payment to hospitals phased in as 50% or less of total payment to hospitals
initially, while the rest of the hospital payment remains fee-for-service
DRG payment to hospitals increased to 100% of total payment to hospitals only
after shadow budgeting and percentage of total payment phase-in
Phased implementation allows hospitals, insurance companies and other
stakeholders time to understand the details and impact of the new payment
system on them, and time to adjust their systems, staff, and operations.
Three Tools for Quality Improvement in Dubai
57
1. Information
only
2. Public
reporting
3. Pay for
quality
Start with information
only, confidential
feedback of quality
measurement results to
hospitals and clinics, with
blinded comparisons to
peers
Next develop public
reporting of quality
measurement results with
public comparison of
hospitals and clinics to
peers
Then add paying for
quality, where quality
measurement results
affect payment levels for
hospitals and clinics
Quality Measurement Phase 1
• Begin quality measurement for information only using 3M
quality measures
• Include measures focused on patient safety and hospital
readmissions, since IR-DRGs provide financial incentives to
increase hospital admissions and reduce quality
• Potentially preventable complications (PPCs)
• Potentially preventable hospital readmissions (PPRs)
58
Quality Measurement Phase 2
59
1.
2.
3.
4.
5.
6.
7.
8.
9.
Background
Introduction to DRGs
Payment with Inpatient DRGs
Calculating DRG Parameters
a. Relative Weights (3M)
b. Base Rate
c. Outliers
Adjusting DRG Payments
Implementing DRGs
Sensitivity Analyses
Monitoring
Projected Timeline
Altijani H Hussin
Health Economics Consultant
Dubai Health Authority
50
Sensitivity Analyses
 To assess the Dubai IR-DRG system for biases and understand the potential effects of
the IR-DRG implementation on the Dubai health care system.
 Conducted at the hospital, insurer, IR-DRG, and healthcare sector levels
 Using the EClaim Link data and the relative weights, base rate, and outliers developed
to reflect the unique system that exists in Dubai
 Additional analyses will examine the effects of a negotiating band (discussed later)
51
Sensitivity Analyses (cont.)
Overall System
Compare overall total
payments made to all
hospitals in Dubai under the
current fee-for-service (FFS)
discounted charges payment
system to overall total
payments that all hospitals
would receive using the IRDRG system.
Geographic Areas
Compare overall total
payments made to all
hospitals in different
geographic areas of Dubai
(e.g. Jumeirah Vs. Karama)
under the current FFS
payment system and under
the IR-DRG payment system.
• Selected with the DHA.
52
Sensitivity Analyses (cont.)
IR-DRG
Compare overall payments and
per admission payments made
by IR-DRG under the current
FFS system and under the
proposed IR-DRG system.
• If specific IR-DRGs have very large
increases or decreases in payments
made between the two different
payment systems, then further
analyze those IR-DRGs.
Hospital
Compare overall payments and
per admission IR-DRG
payments made to individual
hospitals in Dubai by hospital
under the current FFS payment
system and under the IR-DRG
system.
• If specific hospitals are seeing large
gains or decreases in total payments
under the IR-DRG system then
perform further analyses of the
EClaim Link data at the hospital level
examining the case-mix of the
hospital.
53
Sensitivity Analyses (cont.)
Insurer
Compare overall payments made to
hospitals in Dubai and overall and per
admission IR-DRG payments made by
health insurance company under both
the current FFS payment system and
under the IR-DRG system.
• If specific insurers are seeing large increases or
decreases in payments they make to hospitals
under the IR-DRG system then perform further
analysis at the individual health insurance
company level to determine the cause of the
large differences.
54
Sensitivity Analyses – An Example
• Compare overall total payments made to all hospitals in Dubai under the
current fee-for-service (FFS) discounted charges payment system to
overall total payments that all hospitals would receive using the IR-DRG
system.
DRG
Number
of Cases
Total FFS
Payments
DRG Rate
Total DRG
Payments
Difference
(DRG-FFS)
001
4
45,500 AED
11,708 AED
46,832 AED
1,332 AED
002
5
109,500 AED 21,634 AED
108,168 AED
-1,332 AED
All
9
155,000 AED
155,000 AED
0 AED
n/a
55
Need for Monitoring IR-DRGs by DHA
 Incentives for increasing the number of hospital admissions to increase hospital
revenue from additional IR-DRG payments
 Incentives for decreasing services and quality of care for patients to reduce hospital
costs per admissions to increase profits in relation to the fixed IR-DRG payment per
admission
 Incentives for upcoding procedure codes and diagnosis codes in hospital claims to
insurance companies to move to IR-DRG with higher payment rate (increase severity
adjuster)
56
Types of Monitoring
All hospitals –
Dubai health
sector-wide
Individual
hospitals
Individual
IR-DRGs
57
Monitoring 1 – All Hospitals, Dubai Health Sector-wide
 Trends over time – hospital admissions, readmissions, average length of stay,
transfers of patients to other hospitals
 New hospital openings, hospital closures
 Patient safety events – hospital acquired conditions (HACs), patient safety indicators
(PSIs), never events, hospital acquired infections (HAIs)
 Changes in procedure codes, diagnosis codes, average case-mix
 Medical records audits of procedure codes, diagnosis codes
58
Monitoring 2 – Individual Hospitals
 Trends over time – individual hospital payments, individual hospital case-mix,
individual hospital occupancy rate, average length of stay, number of ICU days
 Starting or stopping admissions for specific IR-DRGs
 Changes in numbers of outpatient procedures, outpatient visits, ED visits
 Medical records audits of procedure codes, diagnosis codes, that are included
in the claims data and used to assign IR-DRGs and severity of illness (SOI) levels
for payment
59
Monitoring 3 – Individual IR-DRGs
 Trends over time
▫ Number of times billed per month overall for high volume IR-DRGs,
▫ Number of times billed per month by each individual hospital for high volume
IR-DRGs,
▫ Changes in severity of illness levels (SOI) billed for high volume DRGs
 Starting or stopping billing for specific IR-DRGs
60
Projected Timeline
1st, Feb,
2017
• Shadow Billing Phase I
• DRG codes on eClaimLink
1st, July,
2017
• Shadow Billing Phase II
• Estimated DRG price added to
claims
• Not affecting payments
1st, April,
2018
• DRG Prices Phase
• Affecting hospital payments
61