Race and diagnostic related group prospective hospital payment for medical patients

The diagnostic related group (DRG) prospective hospital payment system has been on line for five years with no major changes implemented by the federal government. Data suggest that the DRG system may be inequitable to patients of lower socioeconomic status. We studied the consumption of hospital resources by race (ie, white vs black) for hospitalized medical patients using the DRG prospective payment system. All adult medical admissions (N = 30,097) were analyzed for a three-year period at a large academic medical center using the DRG "all payor" classification scheme in effect for New York State. We found that black patients (N = 3,373) had a significantly greater (P less than .0001) mean length of hospital stay and cost per patient (adjusted for DRG weight index) compared with white patients (N = 26,724). Black patients also exposed the medical center to greater (P less than .0001) financial risk compared with white patients, as measured by outliers and losses under DRGs. Black patients (P less than .0001) had a significantly higher proportion of emergency admissions to the hospital, a greater severity of illness (as measured by total International Classification of Diseases-9-Clinical Modification codes) (P less than .0001), and higher diagnostic costs (P less than .0001) for each episode of illness. These data suggest that at our medical center black medical patients may consume more hospital resources (adjusted for DRG case mix) compared with whites. It is important that methods to modify DRG prospective hospital payment for medical diseases be considered to provide more equitable DRG reimbursement for black Americans in the future.