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Improving payments for Medicare patients with unrelated surgical procedures
1Department of Health Services, UCLA School of Public Health 90024-1772.
Abstract:
The Medicare prospective payment system (PPS) pays hospitals a fixed payment for patients in 474 categories of diagnosis-related groups (DRGs). Since the beginning of PPS, many DRGs have been modified to improve the accuracy of patient classification and the equity of hospital payments. There are continuing problems, however, in classifying surgical patients who have no procedure related to their reason for admission. Until recently, these patients were classified into a single miscellaneous category (DRG 468) and paid the same amount, despite considerable variation in their clinical conditions and resource use. Three options for improving the payment and classification of such cases were examined. Improvements are possible using each of the options examined. The greatest improvement, however, was achieved by reassigning patients to existing surgical DRGs, because patients with the same surgery tend to have similar costs, regardless of their original reason for entering the hospital. This change in assignment methodology would increase payments to teaching hospitals, where the most costly DRG 468 cases are concentrated. It also would remove potential incentives to deny access to or withhold appropriate treatments from patients needing high-cost surgical procedures. It was concluded that this change should be implemented for hospital payment under PPS.
Insights
Reclassifying surgical patients in Medicare
Area of Science:
- Healthcare policy
- Hospital administration
- Medical economics
Background:
- The Medicare prospective payment system (PPS) uses diagnosis-related groups (DRGs) for hospital payments.
- Current DRG classification has challenges with surgical patients admitted for non-surgical reasons.
- Patients in the miscellaneous DRG 468 exhibit significant variations in clinical needs and resource utilization.
Purpose of the Study:
- To evaluate methods for improving the classification and payment of surgical patients under PPS.
- To address inequities in the current system for patients with non-surgical admissions but requiring surgery.
Main Methods:
- Examined three distinct options for improving DRG classification and payment.
- Focused on reassigning patients to existing surgical DRGs based on procedures performed.
- Analyzed the impact of proposed changes on hospital payments, particularly for teaching hospitals.
Main Results:
- All examined options offered potential improvements in patient classification and payment equity.
- Reassigning patients to surgical DRGs based on procedures yielded the greatest improvement.
- This reassignment acknowledges that surgical procedures, not admission reasons, correlate with costs.
Conclusions:
- Revising DRG assignment for surgical patients is crucial for accurate hospital payments.
- Implementing this change would benefit teaching hospitals and ensure appropriate care access.
- The proposed methodology enhances fairness and resource allocation within the PPS framework.