Impact of Diagnosis-Related-Group (DRG) payment on variation in hospitalization expenditure: evidence from China

Area of Science:

• Health Economics
• Healthcare Management
• Medical Policy

Background:

• Diagnosis-Related-Group (DRG) payment is vital for controlling rising medical costs and expenditure variations.
• This study investigates the influence of DRG payment systems on hospitalization cost variability in China.

Purpose of the Study:

• To analyze the impact of DRG payment implementation on the variation of hospitalization expenditures.
• To assess changes in cost consistency for specific diseases under DRG versus fee-for-service models.

Main Methods:

• Utilized propensity-score matching (PSM) to compare patients with Chronic Obstructive Pulmonary Disease (COPD), Acute Myocardial Infarction (AMI), and Cerebral Infarction (CI).
• Analyzed hospitalization expenditure variation using Interquartile Distance (IQR), Standard Deviation (SD), and concentration indices.
• Compared fee-for-service (FFS) payment groups with DRG payment groups in City Z, China.

Main Results:

• DRG payment reform led to significant reductions in the standard deviation of hospitalization costs for COPD, AMI, and CI patients.
• The concentration indices for hospitalization expenditures across the three diseases fell below zero post-reform, indicating reduced inequality.
• A year-over-year increase in the absolute value of concentration indices suggests a growing trend towards cost standardization.

Conclusions:

• DRG payment systems effectively guide healthcare providers towards more consistent and clinically appropriate treatments.
• The implementation of DRG payments helps align medical care costs with their true clinical value.
• DRG reform demonstrates a positive impact on reducing financial variability in healthcare services for major diseases.