HCA 675 What are the pros and cons of a DRG payor system, and a capitated payor system?

What are the pros and cons of a DRG payor system, and a capitated payor system? If you were a health care czar, which one would you favor and why?

Since the 1990s, diagnosis-related group (DRG)-based payment systems were gradually introduced in many countries. The main design characteristics of a DRG-based payment system are an exhaustive patient case classification system (ie, the system of diagnosis-related groupings) and the payment formula, which is based on the base rate multiplied by a relative cost weight specific for each DRG. Cases within the same DRG code group are expected to undergo similar clinical evolution. Consecutively, they should incur the costs of diagnostics and treatment within a predefined scale. Such predictability was proven in a number of cost-of-illness studies conducted on major prosperity diseases alongside clinical trials on efficiency. This was the case with risky pregnancies, chronic obstructive pulmonary disease, diabetes, depression, alcohol addiction, hepatitis, and cancer. This article presents experience of introduced DRG-based payments in countries of western and eastern Europe, Scandinavia, United States, Canada, and Australia.

This article presents the results of few selected reviews and systematic reviews of the following evidence: published reports on health system reforms by World Health Organization, World Bank, Organization for Economic Co-operation and Development, Canadian Institute for Health Information, Canadian Health Services Research Foundation, and Centre for Health Economics University of York. Diverse payment systems have different strengths and weaknesses in relation to the various objectives. The advantages of the DRG payment system are reflected in the increased efficiency and transparency and reduced average length of stay. The disadvantage of DRG is creating financial incentives toward earlier hospital discharges. Occasionally, such polices are not in full accordance with the clinical benefit priorities.

Keywords: DRG, payments systems, efficiency, managed care, hospital health services

HCA 675 What are the pros and cons of a DRG payor system, and a capitated payor system

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Background

The efficient use of resources, together with increased resource mobilization and improved pooling, is the main key for achieving a faster move toward universal health coverage. Also, the reform of hospital payment mechanisms1 could bring some substantial efficiency gains. Expenditure on hospital services comprises large shares of total health-care spending in countries, regardless of their income level.2,3

Since the 1990s, diagnosis-related group (DRG)-based payments have gradually become the principal means of reimbursing hospitals for acute inpatient care in most countries with high income.4 This financial instrument itself was created in the United States by the historical initiative of Yale University back in 1983.5 In order to increase efficiency in inpatient care or to improve transparency in hospital activities, DRG-based payment systems were gradually introduced in many countries.6

Cases within the same DRG code group are expected to undergo similar clinical evolution. Consecutively, they should incur the costs of diagnostics2 and treatment3 within a predefined scale. Such a predictability was proven in a number of cost-of-illness studies conducted on major prosperity diseases7 alongside clinical trials on efficiency. This was the case with risky pregnancies,8 chronic obstructive pulmonary disease,9 diabetes,10 depression,11 drug12 and alcohol addiction,13 hepatitis,14 neonatal disorders,15 community-acquired pneumonia,16 and cancer.17,18

After successfully meeting the challenge of diversity of diagnostic groups, DRG reimbursement practice spread from North America to the European region. The 2 main design characteristics of a DRG-based payment system are (1) an exhaustive patient case classification system (ie, the system of diagnosis-related groupings) and (2) the payment formula, which is based on the base rate multiplied by a relative cost weight specific for each DRG.19

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I understand this is a lot of information to cover in 5 weeks, however, the Bible says in Philippians 4:13 that we can do all things through Christ that strengthens us. Even in times like this, we are encouraged by God’s word that we have that ability in us to succeed with His strength. I pray that each and every one of you receives strength for this course and life generally as we navigate through this pandemic that is shaking our world today. Relax and enjoy the course!

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Please read through the following information on writing a Discussion question response and participation posts.

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Important information on Writing a Discussion Question

Your response needs to be a minimum of 150 words (not including your list of references)
There needs to be at least TWO references with ONE being a peer reviewed professional journal article.
Include in-text citations in your response
Do not include quotes—instead summarize and paraphrase the information
Follow APA-7th edition
Points will be deducted if the above is not followed

Participation –replies to your classmates or instructor

A minimum of 6 responses per week, on at least 3 days of the week.
Each response needs at least ONE reference with citations—best if it is a peer reviewed journal article
Each response needs to be at least 75 words in length (does not include your list of references)
Responses need to be substantive by bringing information to the discussion or further enhance the discussion. Responses of “I agree” or “great post” does not count for the word count.
Follow APA 7th edition
Points will be deducted if the above is not followed
Remember to use and follow APA-7th edition for all weekly assignments, discussion questions, and participation points.
Here are some helpful links
Student paper example
Citing Sources
The Writing Center is a great resource