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A multivariate approach for classifying hospitals and computing blended payment rates.

J C Vertrees, K G Manton

    Medical Care
    |April 1, 1986
    PubMed
    Summary

    This study introduces a multidimensional approach to hospital payment, using Grade of Membership (GoM) to create unique hospital groups. This method offers a more accurate framework for prospective payment systems compared to conventional grouping methods.

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    Area of Science:

    • Health Economics
    • Healthcare Management
    • Health Services Research

    Background:

    • Prospective payment systems aim for equitable hospital reimbursement based on case mix.
    • Current payment models may oversimplify the multidimensional nature of hospital output.
    • A more sophisticated framework is needed for accurate hospital payment determination.

    Purpose of the Study:

    • To present a multidimensional approach for hospital payment rate determination.
    • To introduce and apply the Grade of Membership (GoM) technique for hospital grouping.
    • To compare GoM-derived hospital groups with conventional grouping methods.

    Main Methods:

    • Utilized the Grade of Membership (GoM) technique to define unique hospital groups.
    • Developed a new grouping concept based on hospitals' internal cost structures.

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  • Employed ordinary least squares regression to calculate payment rates for identified groups.
  • Conducted simulation analysis to compare GoM groups against traditional groups.

    • Main Results:

    • The Grade of Membership (GoM) technique successfully generated unique hospital groups.
    • Hospitals were characterized by their degree of similarity to these GoM-defined groups.
    • The multidimensional approach demonstrated potential for more nuanced hospital classification.
    • Simulation analysis provided a comparative evaluation against conventional grouping strategies.

    Conclusions:

    • A multidimensional framework, exemplified by Grade of Membership (GoM), offers a more refined approach to hospital payment.
    • This method allows for a more accurate characterization of hospitals based on output similarity.
    • The findings suggest a need to evolve current payment systems towards more complex, multidimensional models.