Hospital reimbursement schemes. Japan's point system and the United States' diagnosis-related groups

Facing spiraling medical costs, Japan and many industrialized countries in the West have tried to control reimbursements to medical providers by setting reimbursement rates. The United States' diagnosis-related groups' (DRGs) pricing has attracted a considerable amount of attention in recent years. This article discusses Japan's hospital reimbursement scheme called the point system, which sets a fixed fee for each item of service, and evaluates Japan's system by comparing it with the United States' DRGs. The article points out that Japan's reimbursement scheme encourages individualized care but fails to provide incentives for it to operate efficiently, and that the design of Japan's system has invited cross-subsidization between complex ailments and less complex ones, and between technical procedures and ancillary services. Some Japanese private hospitals survive only by providing more diagnostic tests and drugs. Japan's cultural and institutional structure that has a critical bearing on her reimbursement system is also discussed to provide a better understanding of the system.