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PubMedDate not supplied

Do DRG reimbursement rates reflect nursing costs?

The assumption underlying diagnosis related group (DRG) reimbursement is that the prospective, diagnosis-determined rates reflect actual costs incurred during a hospital stay. The nursing component represents a significant percentage of the costs associated with a patient's hospital stay. However, a study of actual nursing labor costs for 240 acute care patients in five DRG categories showed that some DRGs vary in daily nursing labor costs up to 500% over the course of a patient's stay. For some DRGs, the patient's DRG classification is not an adequate measure for determining, assigning, or allocating nursing costs within the institution. Hospitals that do not track actual nursing costs risk unanticipated cost overruns for some diagnoses that may have a significant effect on hospital finances.

Adolescent↗
PubMed2003

Comparing the financial risk of bed-day and DRG based pricing types using parametric and simulation methods.

The extent of random financial risk involved in the Finnish bed-day and Diagnosis Related Groups (DRG) based hospital pricing systems were estimated and compared using parametric and simulation methods. DRG based payment schemes were found to provide significantly better protection against financial risk for municipalities, but municipality's size was the main determinant of financial risk. Small municipalities should use longer contracts between hospitals or form bigger purchaser-organisations for risk pooling. In addition, the current risk management system proved to be ineffective in decreasing the random variation in total costs.

Benchmarking↗
PubMed2003

Diagnosis-related group-adjusted hospital costs are higher in older medical patients with lower functional status.

OBJECTIVES: To determine whether hospital costs are higher in patients with lower functional status at admission, defined as dependence in one or more activities of daily living (ADLs), after adjustment for Medicare Diagnosis-Related Group (DRG) payments. DESIGN: Prospective study. SETTING: General medical service at a teaching hospital. PARTICIPANTS: One thousand six hundred twelve patients aged 70 and older. MEASUREMENTS: The hospital cost of care for each patient was determined using a cost management information system, which allocates all hospital costs to individual patients. RESULTS: Hospital costs were higher in patients dependent in ADLs on admission than in patients independent in ADLs on admission ($5,300 vs $4,060, P<.01). Mean hospital costs remained higher in ADL-dependent patients than in ADL-independent patients in an analysis that adjusted for DRG weight ($5,240 vs $4,140, P<.01), and in multivariate analyses adjusting for age, race, sex, Charlson comorbidity score, acute physiology and chronic health evaluation score, and admission from a nursing home as well as for DRG weight ($5,200 vs $4,220, P<.01). This difference represents a 23% (95% confidence interval=15-32%) higher cost to take care of older dependent patients. CONCLUSION: Hospital cost is higher in patients with worse ADL function, even after adjusting for DRG payments. If this finding is true in other hospitals, DRG-based payments provide hospitals a financial incentive to avoid patients dependent in ADLs and disadvantage hospitals with more patients dependent in ADLs.

APACHE↗
PubMed1998

The costs of hospital services: a case study of Evangelical Lutheran Church hospitals in Tanzania.

The health care systems of many developing countries are facing a severe crisis. Problems of financing services leads to high patient fees which make institutions of Western health care unaffordable for the majority of the rural poor. The conflict between sustainability and affordability of the official health care system challenges both local decision-makers and health management consultants. Decisions must be made soon so that the existing health care systems can survive. However, these decisions must be based on sound data, especially on the costs of health care services. The existing accounting systems of most hospitals in developing countries do not provide decision-makers with these data. Costs are generally underestimated. The leadership of the 16 hospitals of the Evangelical Lutheran Church in Tanzania is currently analyzing how the existing health care services should be restructured. Therefore, reliable estimates of the costs of hospitals services are required. A survey on 'Costing of health services of the Evang. Luth. Church in Tanzania' was prepared, which summarizes the results of seven months of field investigations in Lutheran hospitals. The major findings are that the costs of providing adequate services are much higher than expected. The most important factors determining these costs are the administrative efficiency of the hospital and the scope of services offered. The paper closes with some recommendations on how to improve the services in order to make them both affordable for the rural poor and financially sustainable for the Church. It is concluded that even the best improvement of technical efficiency will not safeguard the survival of the hospital-based health care services of the Lutheran Church in Tanzania. These findings call for a reallocation of health care resources to lower levels of the health care pyramid.

Christianity↗
PubMed2004

Coding response to a case-mix measurement system based on multiple diagnoses.

OBJECTIVE: To examine the hospital coding response to a payment model using a case-mix measurement system based on multiple diagnoses and the resulting impact on a hospital cost model. DATA SOURCES: Financial, clinical, and supplementary data for all Ontario short stay hospitals from years 1997 to 2002. STUDY DESIGN: Disaggregated trends in hospital case-mix growth are examined for five years following the adoption of an inpatient classification system making extensive use of combinations of secondary diagnoses. Hospital case mix is decomposed into base and complexity components. The longitudinal effects of coding variation on a standard hospital payment model are examined in terms of payment accuracy and impact on adjustment factors. PRINCIPAL FINDINGS: Introduction of the refined case-mix system provided incentives for hospitals to increase reporting of secondary diagnoses and resulted in growth in highest complexity cases that were not matched by increased resource use over time. Despite a pronounced coding response on the part of hospitals, the increase in measured complexity and case mix did not reduce the unexplained variation in hospital unit cost nor did it reduce the reliance on the teaching adjustment factor, a potential proxy for case mix. The main implication was changes in the size and distribution of predicted hospital operating costs. CONCLUSIONS: Jurisdictions introducing extensive refinements to standard diagnostic related group (DRG)-type payment systems should consider the effects of induced changes to hospital coding practices. Assessing model performance should include analysis of the robustness of classification systems to hospital-level variation in coding practices. Unanticipated coding effects imply that case-mix models hypothesized to perform well ex ante may not meet expectations ex post.

Comorbidity↗
PubMed1980

Regional resource allocations for home care: an experiment.

Decentralized health service delivery responsive to the needs of local populations implies allocating program funds to regions on the basis of predetermined criteria that can facilitate effective planning and budgeting. In 1974, the Manitoba Continuing Care Program attempted to develop a formula for regional allocations for health care services. Four methods were assessed; their strengths and weaknesses are briefly discussed.

Aged↗
PubMedDate not supplied

Paying for hospitals' community service.

U.S. hospitals incur costs of $25-$50 billion annually in providing "community service," primarily in the form of health professions education and standby costs. They also provide approximately $30 billion in uncompensated care. Historically, such "community service" costs have been subsidized explicitly by Medicare and implicitly in the prices paid by private payers. The sustainability of that system is highly uncertain. With a growing number of uninsured patients, allocating nonreimbursable costs to paying customers can create a "death spiral," in which fewer paying customers bear a larger proportion of such costs. The obvious solutions to this problem all have serious limitations.

Community-Institutional Relations↗
PubMed1992

Shifting no solution to problem of increasing costs.

Rising healthcare costs are being allocated unevenly because some stakeholders are better than others at insulating themselves from paying their share of the burden. Those with significant or group purchasing power are paying less than actual cost, forcing providers to shift a disproportionate share of the costs to small businesses and non-group purchasers. The magnitude of this cost shifting is large and growing. Its primary impact is a destabilization of insurance markets. Stability can only be restored with well thought-out proposals that deal with causes of the cost increases.

Cost Allocation↗
PubMed2003

Measuring geographic inequities in the Portuguese health care system: an estimation of hospital care needs.

Portugal created a NHS to achieve greater equity of access to health care. Successive governments continued to assert the importance of equity in the face of evidence of inequities in supply of hospital resources, but lacked methods to provide sound information on the degree of inequities in Portugal and hence how to achieve greater equity. Capitation formulae have been increasingly used in other countries with a NHS to measure geographical inequities and allocate resources to reduce them. The main objective of this paper was to develop a capitation formula to measure need for hospital care for the Portuguese system by transferring this technology from methods used in other countries, and, in particular, in England. We find, however, problems with the common use of standardised mortality ratios (SMRs) as a measure of need and found age-specific mortality ratios to offer more soundly-based estimates. We also raise questions on the use of empirical estimates of utilisation of health care by age and sex as they appear to reflect inadequacies of health care in Portugal. We also believe it is important to improve knowledge of health insurance and care outside the NHS. Our results show that there are considerable inequities on the distribution of hospital resources in Portugal.

Adolescent↗
PubMed2002

Cost characteristics of hospitals.

Modern hospitals are complex multi-product organisations. The analysis of a hospital's production and/or cost structure should therefore use the appropriate techniques. Flexible functional forms based on the neo-classical theory of the firm seem to be most suitable. Using neo-classical cost functions implicitly assumes minimisation of (variable) costs given that input prices and outputs are exogenous. Local and global properties of flexible functional forms and short-run versus long-run equilibrium are further issues that require thorough investigation. In order to put the results based on econometric estimations of cost functions in the right perspective, it is important to keep these considerations in mind when using flexible functional forms. The more recent studies seem to agree that hospitals generally do not operate in their long-run equilibrium (they tend to over-invest in capital (capacity and equipment)) and that it is therefore appropriate to estimate a short-run variable cost function. However, few studies explicitly take into account the implicit assumptions and restrictions embedded in the models they use. An alternative method to explain differences in costs uses management accounting techniques to identify the cost drivers of overhead costs. Related issues such as cost-shifting and cost-adjusting behaviour of hospitals and the influence of market structure on competition, prices and costs are also discussed shortly.

Capital Expenditures↗
PubMed2000

The cost-effectiveness of varicella screening and vaccination in U.S. Army recruits.

Varicella outbreaks in the U.S. Army disrupt training, reduce readiness, and represent substantial costs. Vaccination of susceptible individuals may be cost-effective. We conducted a cost-effectiveness analysis comparing screening of all incoming recruits and vaccination of susceptible individuals at either initial entry training (IET) or medical entrance processing station (MEPS), universal vaccination at IET, and no intervention. Primary health outcomes included the number of varicella cases prevented during the 8-week initial training period. The varicella hospitalization rate was 21.6 per 10,000 per year. In 100,000 recruits, 36 cases of varicella are expected at a cost of $181,000 in the absence of an intervention. Screening at IET would prevent 4 cases but would cost an additional $3,255,000 more than no intervention. Screening at MEPS would prevent 3 cases and save $521,000 per case prevented during the IET but would cost $2,734,000 more than no intervention. Universal vaccination would prevent 2 cases but would cost $15,858,000 more than MEPS screening and $18,592,000 more than no intervention. These results are robust. Cost per case of varicella prevented ranged from $390,000 to $7.9 million. Scarce prevention resources could be more cost-effectively allocated to other prevention programs.

Absenteeism↗
PubMedDate not supplied

Laboratory manager's financial handbook. Cost accounting: the road map to financial success.

Cost accounting is the most basic element of the laboratory's financial management structure. Historically, cost accounting in the nonmedical world referred to accumulating and assigning costs to units of production and departments, primarily for inventory valuation and income determination. In the health industry, microcost accounting is distinguishable from macrocost (management/internal) accounting and serves multiple purposes. Microcost accounting pertains to gathering and providing information for decision making. The range of decisions include managing recurring operations, making nonrecurring strategic decisions, and formulating major organizational policies. Macrocost accounting fulfills the legal requirements of reporting to stockholders, auditors, governmental agencies, and other external parties.

Accounting↗
PubMedDate not supplied

United States Department of Veterans Affairs Chiropractic Services Pilot Program evaluation study SDR #86-09: a critique.

The following critique of the Chiropractic Services Pilot Program (SDR #86-09) focuses on two major issues: the terms of reference established for the study and the research constraints that arose from either the terms of reference or their interpretation; the technical design and execution of the research. The review suggests that the constraints invalidated the study and ensured that no comparisons are possible between chiropractic and medical care for VA patients based on these results. The constraints resulted in the use of a nonexperimental design, distinct samples being chosen and nonequivalent care settings being compared. The critique also reveals that in each of the design steps (eligibility criteria, sampling, protocols, data collection, analysis, interpretations) there were serious methodological flaws. These ensured that the two populations being compared (chiropractic patients versus medical patients) were in fact noncomparable. In terms of the economic cost comparisons, the design guaranteed the comparison was unfair, pitting a private, fee-for-service chiropractic practice against a not-for-profit, managed-care, federally regulated and budgeted institution. Furthermore, the allocation of costs to the two groups was done inaccurately. The critique concludes that the results are not valid, they cannot be used for generalizing, they cannot be used for statistical analysis and they should not be used to establish policy. The research design and the methodological flaws meant that the objectives of the study could not be met.

Chiropractic↗
PubMed1998

Health funding: the nature of distortions and implications for the health service mix.

With restricted public sector budgets, there is increasing pressure to obtain value for money in the allocation of health sector resources. Distortions and inefficiencies created by features of Australia's health funding arrangements prevent health resources moving from lower valued to higher valued activities. These distortions tend to restrict resources being allocated to disease prevention and health promotional approaches, favouring medical treatment. These propositions are illustrated, largely with reference to diabetes.

Australia↗
PubMed2000

[Relationship between quality and cost of the drug prescription in primary care].

OBJECTIVES: With a system of qualitative indicators, to analyse the pharmaceutical prescription of general practitioners (GPs), and to evaluate the relationship of these indicators to the overall pharmaceutical prescription expenditure per inhabitant. DESIGN: Retrospective descriptive study. SETTING: Primary care. MEASUREMENTS AND MAIN RESULTS: The drugs prescription of 285 GPs from 32 primary care teams was evaluated, with the individual prescription of each doctor as the unit of analysis. The prescription was classified in 3 categories according to its intrinsic value (IV): low (< or = 75%), medium (76-79%) and high (> or = 80%). Selected as tracers of over-prescription were: daily dose per inhabitant (DDI) of antibiotics (AB), DDI of non-steroid anti-inflammatory drugs (NSAID), and DDI of ulcer drugs (ULC). Selected as tracers of selection were: % DDI third-generation cephalosporins/DDI total cephalosporins; % DDI broad-spectre quinolones/DDI total quinolones; and % DDI NSAID/DDI NSAID plus analgesics. Quantitative indicators studied were: total expenditure per allocated population, cost per drugs prescription of doubtful efficacy, and cost per daily dose of AB, NSAID and ULC. Variance analysis, including the Scheffe test for multiple comparisons and Pearson's linear correlation, was applied. 26% of the prescriptions had an IV below 75%, and 34% had an IV above 80%. The means of DDI of AB among the categories of IV were different (p < 0.0001), as were those of DDI of NSAID (p < 0.0001) and of ULC (p = 0.007). Lower consumption of AB, NSAID and ULC was found in prescriptions with the highest IV %. The third-generation cephalosporins and the NSAID + analgesics showed significant differences in the three IV categories (p < 0.0001 and p = 0.041), unlike broad-spectrum quinolones (p = 0.18). The total expenditure per allocated population was less for GPs whose prescriptions had the highest IV %; whereas the cost per prescription and cost per daily dose showed no significant differences for IV categories. CONCLUSIONS: The doctors with the best qualitative profile on these indicators had less expenditure per inhabitant. However, no differences were found in the cost per prescription or cost per treatment between doctors. Therefore, interventions must prioritize improving drug prescription quality rather than just promoting changes to lower-cost drugs.

Costs and Cost Analysis↗
PubMed2001

Cost-effective emission abatement in europe considering interrelations in agriculture.

Agriculture is an important source of ammonia (NH3), which contributes to acidification and eutrophication, as well as emissions of the greenhouse gases nitrous oxide (N2O) and methane (CH4). Controlling emissions of one of these pollutants through application of technical measures might have an impact (either beneficial or adverse) on emissions of the others. These side effects are usually ignored in policy making. This study analyses cost-effectiveness of measures to reduce acidification and eutrophication as well as agricultural emissions of N2O and CH4 in Europe, taking into account interrelations between abatement of NH3, N2O, and CH4 in agriculture. The model used is based on the RAINS (Regional Air pollution INformation and Simulation) model for air pollution in Europe, which includes emissions, abatement options, and atmospheric source-receptor relationships for pollutants contributing to acidification and eutrophication. We used an optimisation model that is largely based on the RAINS model but that also includes emissions of N2O and CH4 from agriculture and technical measures to reduce these emissions. For abatement options for agricultural emissions we estimated side effects on other emissions. The model determines abatement strategies to meet restrictions on emission and/or deposition levels at the least cost. Cost-effective strategies to reduce acidification and eutrophication in Europe were analysed. We found that NH3 abatement may cause an increase in N2O emissions. If total agricultural N2O and CH4 emissions in Europe were not allowed to increase, cost-effective allocation of emission reductions over countries in Europe changed considerably.

Agriculture↗