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Medical practice, case mix, and cost containment. A new role for the attending physician
Insights
Hospital cost containment requires effective reimbursement systems. Current diagnostic-related group (DRG) approaches fail management control principles, necessitating physician involvement in performance standards for better medical and financial outcomes.
Area of Science:
- Healthcare Management
- Health Economics
- Medical Policy
Background:
- Political pressures are driving hospital cost containment, making case-specific reimbursement systems increasingly likely.
- Effective cost control requires reimbursement systems to adhere to fundamental management control principles.
Purpose of the Study:
- To evaluate the suitability of current case-specific reimbursement systems for effective hospital cost containment.
- To propose an improved hospital control system that integrates physicians into management.
Main Methods:
- Analysis of existing reimbursement models, specifically the diagnostic-related group (DRG) approach.
- Examination of core principles of management control systems in the context of healthcare.
Main Results:
- The diagnostic-related group (DRG) approach, while common, does not align with essential management control principles.
- A more appropriate system would involve direct incorporation of physicians into the hospital's management structure.
Conclusions:
- Physicians must take a leading role in defining performance standards for new control systems.
- Integrating physicians into management is crucial for ensuring medical and financial appropriateness of hospital control systems.
Abstract:
Present political pressures for hospital cost containment appear to make some form of case-specific reimbursement system inevitable. For such a system to be able to control hospital costs effectively, however, its design must reflect the fundamental and traditional principles of management control systems. Although the diagnostic-related group (DRG) approach is the most frequently discussed form of case-mix-sensitive reimbursement, DRGs do not satisfy basic management control principles. Under a more appropriate hospital control system, however, physicians would be incorporated directly into the hospital's management structure. Consequently, to ensure that this new control system is medically as well as financially appropriate, physicians should seize the initiative in determining the standards against which their performance will be measured.