Measuring the effect of illness severity on revenue under DRGs

Hospital financial managers have come to recognize that to profitably operate a hospital under DRGs, they must consider factors other than length of stay. They must also look at illness severity, medical care effectiveness, and treatment efficiency. It is therefore advantageous to develop a method that measures the effect of admission severity on DRG payment and provides information on medical care effectiveness and treatment efficiency improvements. The method described in this article, the admission severity measure, allows the manager to consider both these quality and cost issues.