Efficiency, costs, and quality: the New Jersey experience revisited.

Area of Science:

• Health Services Research
• Healthcare Management
• Health Economics

Background:

• New Jersey implemented two concurrent prospective payment systems: the all-payer Diagnosis-Related Group (DRG) system and the State Health Assistance Revisions and Enhancements (SHARE) program.
• The study analyzes the impact of these systems on hospital departments, using them as the unit of analysis.

Purpose of the Study:

• To compare the effects of the all-payer DRG system versus the SHARE program on hospital cost control and resource utilization.
• To determine how different prospective payment models influence hospital management and patient care costs.

Main Methods:

• Comparative analysis of two prospective payment systems (DRG and SHARE) in New Jersey.
• Hospital department as the unit of analysis to assess cost control and service utilization.
• Examination of direct costs per case, cost per day, length of stay, and utilization of specific services (radiology, laboratory).

Main Results:

• The DRG system induced more comprehensive cost control than the SHARE program, affecting direct costs per case and daily nursing care costs.
• DRG implementation led to a reduction in hospital length of stay and decreased daily and per-case utilization of radiological procedures.
• Conversely, the DRG system was associated with an increase in the daily use and per-case volume of laboratory procedures.

Conclusions:

• The comprehensive nature of the all-payer DRG system was more effective in promoting hospital cost containment across various dimensions compared to the SHARE program.
• While DRG systems can reduce length of stay and certain service utilization, they may also lead to shifts in resource use, such as increased laboratory testing.