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The effectiveness of the neonatal diagnosis-related group scheme
Marcello Montefiori1, Michela Pasquarella1, Paolo Petralia2
1Department of Economics, University of Genoa, Genoa, Italy.
Insights
The neonatal diagnosis-related group (DRG) system shows significant cost inefficiencies for respiratory distress syndrome patients. Very low birth weight infants incur substantial losses, while term infants generate surpluses, indicating a need for DRG adjustments.
Area of Science:
- Healthcare Economics
- Neonatal Care
- Medical Billing and Reimbursement
Background:
- The neonatal diagnosis-related group (DRG) system is widely used for healthcare reimbursement.
- Respiratory distress syndrome (RDS) is a common condition in neonates requiring intensive care.
- Variability in patient costs within the same DRG can lead to financial inefficiencies for hospitals.
Purpose of the Study:
- To evaluate the effectiveness of the neonatal DRG scheme for respiratory distress syndrome patients.
- To analyze the variable costs and reimbursement accuracy for neonates within the same DRG.
- To identify cost determinants and propose adjustments for a fairer reimbursement system.
Main Methods:
- Utilized data from 243 infants hospitalized in a Neonatal Intensive Care Unit in Italy (2016).
- Estimated average cost per patient using operating and management costs.
- Employed cluster analysis and Tobit regression to assess cost determinants like birth weight, gestational age, and discharge status.
Main Results:
- Observed significant cost variability within the same DRG, ranging from €267 to €265,669.
- Very low birth weight infants (under 1,170g) incurred costs approximately double the DRG reimbursement, resulting in an estimated loss of €36,420 per surviving baby.
- Term newborns generated costs approximately €20,000 less than their DRG reimbursement.
Conclusions:
- The current neonatal DRG system demonstrates inefficiency and inequity in managing respiratory distress syndrome cases.
- The system financially benefits hospitals treating mainly term infants while penalizing those caring for very low birth weight infants.
- A birth weight adjustment to the DRG system is recommended to ensure fairer cost reimbursement and mitigate potential strategic behaviors like 'up-coding'.
Abstract:
The goal of this study is to investigate the effectiveness of the neonatal diagnosis-related group scheme in patients affected by respiratory distress syndrome. The variable costs of individual patients in the same group are examined. This study uses the data of infants (N = 243) hospitalized in the Neonatal Intensive Care Unit of the Gaslini Children's Hospital in Italy in 2016. The care unit's operating and management costs are employed to estimate the average cost per patient. Operating costs include those related to personnel, drugs, medical supplies, treatment tools, examinations, radiology, and laboratory services. Management costs relate to administration, maintenance, and depreciation cost of medical equipment. Cluster analysis and Tobit regression are employed, allowing for the assessment of the total cost per patient per day taking into account the main cost determinants: birth weight, gestational age, and discharge status. The findings highlight great variability in the costs for patients in the same diagnosis-related group, ranging from a minimum of €267 to a maximum of €265,669. This suggests the inefficiency of the diagnosis-related group system. Patients with very low birth weight incurred costs approximately twice the reimbursement set by the policy; a loss of €36,420 is estimated for every surviving baby with a birth weight lower than 1,170 grams. On the contrary, at term, newborns cost about €20,000 less than the diagnosis-related group reimbursement. The actual system benefits hospitals that mainly treat term infants with respiratory distress syndrome and penalizes hospitals taking care of very low birth weight patients. As a result, strategic behavior and "up-coding" might occur. We conduct a cluster analysis that suggests a birth weight adjustment to determine new fees that would be fairer than the current costs.
