The challenge of 'real' competition in Medicare.
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Biomedical subjects
Publications and source records attributed to R F Averill.
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PPS in its current form has achieved significant cost savings in three years. But to further reduce the costs of the Medicare program, competitive market forces should be introduced.
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PPS is in the midst of a phase-in period where DRG rates are based on a combination of national and regional rates and hospital-specific actual costs. At the end of this period, the regional rates and the hospital-specific payments will be replaced by one national DRG rate. Is this method the best solution for PPS? One national rate does not reflect uncontrollable cost variations due to regional factors and the variability of DRGs. Instead, Medicare hospital payments should be based on a combination of regional and national rates. And, using a coefficient of variation to determine the hospital payment derived from the national rate, a DRG rate can be phased in that recognizes regional and DRG variability.
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As they are now, defined, the DRGs form a manageable, clinically coherent set of patient classes that relate a hospital's case mix to the resource demands and associated costs experienced by the hospital. DRGs are defined based on the principal diagnosis, secondary diagnoses, surgical procedures, age and discharge status of the patients treated. Through DRGs, hospitals can gain an understanding of the patients being treated, the costs incurred and within reasonable limits, the services expected to be required. The classification of patients into DRGs is a constantly evolving process. As coding schemes change, as more comprehensive data is collected or as medical technology or practice changes, the DRG definitions will need to be reviewed and revised.
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Under PPS an effective utilization management system is essential and the implementation of such systems presents a new challenge for hospital managers. An effective utilization management system must have the following characteristics: a process for establishing expected resource levels for each DRG; the ability to assign a working DRG at admission; a review schedule for each DRG; a method of identifying consistent patterns of high utilization; a focused review plan which targets selected DRG and physicians; a method of predicting the clinical treatment requirements of each patient; a review process which evaluates the need for continued hospitalization and identifies the reasons for any misutilization, and a feedback process which modifies the focused review plan on an ongoing basis. By operating a utilization management system with these attributes on a concurrent basis, a hospital will achieve the monitoring and control over its resources so critical under PPS. Hospitals that are able to successfully implement a utilization management system will have accomplished one of the essential components necessary to respond to PPS.
This article describes Ambulatory Visit Groups (AVGs) and the process by which they were defined. An approach to the analysis of physician productivity in the ambulatory setting is then demonstrated, with data derived from the National Ambulatory Medical Care Survey [1]. Finally, recommendations for future work are presented to make this approach more effective in designing and managing ambulatory care delivery organizations.
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Professional Standards Review Organization (PSRO) operating guidelines recommend the use of Professional Activity Study (PAS) length of stay norms for conducting concurrent review. These norms, determined by aggregating discharge abstracts from PAS hospitals in the same United States census region, are assigned to patients based only on information known at admission. This study investigated the relationship between patient information available at admission and the information available at discharge in light of its effects on the concurrent review process. Analyzing 52,210 patient records from 68 hospitals in one PSRO setting, it was found that changes in patients' primary diagnosis resulted in changes in their PAS diagnostic category for 41.3 per cent of the patients. A change in PAS diagnostic caetgory after the assignment of the review norm resulted in missed and unnecessary reviews as well as early and late reviews. These findings indicate that there are serious operational problems with the current method of performing concurrent review.
This paper outlines the system for cost accounting and managerial control which is an extension of the usually accepted departmental costing systems and takes as its units the 383 Diagnosis Related Groups (DRGs) considered to be the hospital's products. It is held that such an approach offers hospital managers a more powerful, analytic, budgeting, and cost-finding tool and offers the opportunity to involve the medical staff in the issues of how their practice patterns are affecting hospital costs.
A large portion of the resources of the Professional Standards Review Organization Program have been directed toward the review of inpatients to determine their need for continued hospitalization. The primary goal of this review process is the containment of hospital costs through the elimination of unnecessary patient hospitalization. A cost benefit analysis of this review process shows that the potential financial savings accrued are unlikely to offset the costs associated with the review procedure.