Improving patient-level costing in the English and the German ‘DRG’ system
Section snippets
Introduction: DRG patient-level costing
Both the English health care resource group (HRG) system [1] and the German diagnosis related groups system (G-DRG) [2] is used for national reimbursement calculation, and they influence management decisions in hospitals. The accuracy of reimbursement and the practical relevance of the standardized cost accounting schemes are dependent on precise case-based cost apportioning. DRGs serve as the basis for budgeting and cost control in hospital management [3]. Thus, the full costs of the complete
Conceptual framework and method
This paper claims not to analyze the whole inpatient cost accounting systems of England and Germany for national tariff calculation (therefore see [13], [14], [26], [27]). It focuses on the most controversial and demanding stage: cost apportioning at patient-level. The conceptual framework for this study is the G-DRG cost accounting scheme according to the InEK handbook for calculation [8] and the publications from the Department of Health and Monitor on PbR costing and management schemes
English patient-level cost apportioning
The mandatory HRG costing scheme follows a top-down approach and is defined by the costing manual from the Department of Health [15], summarized by Epstein et al. [14], [26]. General ledger costs are apportioned until costs are distributed to high-level control totals. Thus, costs are apportioned directly to specialties, services or patients. If this is impossible (e.g., for indirect costs and overheads), cost pools consisting of related apportioned costs and related direct cost-centers are set
German patient-level cost apportioning
Before the patient-level cost apportioning on all direct cost-centers (patient contact) is performed, all DRG-relevant costs on indirect cost-centers (no patient contact, e.g., management) are apportioned to direct cost-centers in a way that takes the service exchange between indirect cost-centers and direct cost centers into account. Cost drivers for the apportioning of costs between cost-centers (e.g., the number of cases for the apportioning of administrative costs) follow the method of
Comparison of the patient-level cost apportioning methodologies
To compare the G-DRG scheme and the PbR scheme, only organizations that perform PLICS (and in some categories SLR) can be compared. According to a Chartered Institute of Management Accountants study, 17% of all providers in the PbR system participating in the survey currently use highly detailed PLICS systematics; this is comparable to the 16% of calculation hospitals in the G-DRG system [20], [33]. The remainder uses SLR or only the mandatory costing guidelines, both less accurate, and not
A best available patient-level cost apportioning standard
Materiality by quality score/relative value units/key cost drivers. Participation rates in patient-level cost accounting of around 16–17% in the PbR and G-DRG systems cause representativeness issues in reimbursement calculation. The technical and most common reason for non-participation is that hospitals do not have the cost accounting prerequisites to calculate accurately at the patient-level [7]. The PbR system uses a stepwise integration of all providers in a partially standardized
Advantages and limitations of the best available standard
Without this best available standard, the measurement of process efficiency in terms of capacity utilization is weak. Transparency is limited. Resource planning and management at several aggregation levels (customers/products/channels/segments/processes) is a characteristic of a high-quality cost apportioning methodology [11]. The best available standard enables similar aggregation levels in hospitals: patient/DRG/DRG group/department/service-line. However, there are costing recommendations
Conclusion
Improving and harmonizing inpatient cost accounting in Europe is a current topic for stakeholders in the health policy literature, especially for regulators [8]. The analysis of several DRG systems in Europe [8] shows that this new costing scheme, combining the most sophisticated elements from both the English PbR scheme and the G-DRG scheme is applicable in general in many European countries. For example, the French DRG costing scheme [56], [57] or the Dutch DBC costing scheme [58], [59] is
Acknowledgment
Special thanks go to Dr. Anja Kern from the Health Management Group, Imperial College Business School, London, for providing valuable inputs on the English costing schemes.
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