Burn DRGs: effects of recent changes and implications for the future

Area of Science:

• Healthcare Economics
• Burn Care Management
• Hospital Financial Analysis

Background:

• Tertiary care centers face financial challenges with the implementation of Diagnosis Related Groups (DRGs).
• Concerns exist regarding the potential adoption of DRG-based reimbursement by other third-party payors.
• The financial viability of specialized units like burn centers is a key consideration.

Purpose of the Study:

• To analyze the current financial status of the Burn Center at the University of New Mexico Hospital.
• To assess the future financial impact of universal DRG-based reimbursement on the Burn Center.
• To evaluate the effect of specific DRG changes, such as DRG 472, on burn unit finances.

Main Methods:

• Retrospective financial analysis of the Burn Center from fiscal years 1985-1987.
• Comparison of actual financial performance across different patient payor groups (Medicare, other third-party, indigent).
• Hypothetical financial modeling based on the conversion of all third-party payments to DRGs.

Main Results:

• The Burn Center incurred a total loss of $214,101 from fiscal years 1985-1987.
• Medicare patients resulted in a loss of $246,512, while other third-party payors generated a profit of $724,762.
• A hypothetical universal DRG system could escalate the 3-year loss to $1,253,393.

Conclusions:

• The current financial performance of the Burn Center is strained, particularly with Medicare reimbursement.
• A universal shift to DRG-based reimbursement poses a significant financial risk, potentially leading to substantial losses.
• Recommendations are needed to address financial challenges and mitigate the impact of DRG policies on burn centers.