Transcript - RBF Health

Case-Based Hospital
Payment Systems:
Key Aspects of Design and
Implementation
Cheryl Cashin - USAID ZdravPlus
Project/Abt Associates
1
Why are Hospital Payment Systems
Important?

The hospital inpatient sector almost always consumes the
greatest share of health care resources

Therefore, the way hospitals are paid can have a particularly
strong influence on the performance of the health care system
as a whole

There are alternative methods for paying hospitals, all of which
have a variety of strengths and weaknesses

Some hospital payment systems may be appropriate at certain times in
a country;

Most appropriate payment system may change over time

Often most effective to use payment methods in combination
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Technical Concepts
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Definition of Case-Based Payment


The health purchaser pays all hospitals in the payment
system a fixed rate for each case that falls into one of a set
of defined categories.
Payment rates can be defined as
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the global average cost for all hospital cases
the average cost per case in each hospital department
or the average cost per case in the patient’s diagnosis category.
The fixed payment rates are set for a group of hospitals,
rather than for a single hospital

Implementing a new payment system for a single hospital will not
achieve the goals of a new payment system.
4
Incentives
Economic signals that direct individuals and
organizations toward self-interested behavior.
Health providers respond to economic signals in
payment systems to maximize the positive—and
minimize the negative—effects on their income
and other interests.
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What are the Incentives of CaseBased Payment?

Reduce cost/improve efficiency of inputs, for
example:
 Reduce total inputs per case
 Reduce length of stay
Employ more nurses and fewer physicians
 Shift rehabilitation care to outpatient setting


Increase productivity--total # of cases (including
unnecessary hospitalizations)
May have positive or negative consequences for patients,
purchaser, and the system
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Potential Goals of a Case-Based Hospital
Payment System

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Reorient health financing toward
reimbursing services for the
population rather than
infrastructure (buildings)
Create incentives for hospitals to
deliver higher quality services
using fewer or lower cost inputs
Introduce hospital competition and
choice for patients or otherwise
increase the responsiveness of the
health system
Allow government funds to be
used to purchase services from
private hospitals




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Improve the efficiency of resource
allocation across hospitals, and
between the hospital sector and
other levels of care
Drive restructuring, and re-profile
or close inefficient
hospitals/departments
Improve the equity of health
financing
Generate information for better
management of the health sector
Increase hospital management
autonomy (decentralization of
health facility-level management)
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Why Case-Based Payment?
Case-based hospital payment systems have been
seen as a valuable tool in a wide variety of contexts
for:

Reorienting provider payment from input-based
budgets to paying for outputs, and

As a way to introduce efficiency incentives and
competition into the hospital sector.
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Methodological Issues
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Components of a Per Capita Payment
System

Minimum components:
 the set of parameters for calculating the payment rates
for each type of case; and
 an administration system (information and billing
system)

Case-based payment systems using diagnosisbased case groups also require an information
system that computerizes the recording of cases
by the hospitals and the grouping of cases into
payment categories.
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Payment Formula
Payment per casei  BR *CGWi x Oh
Where,
Payment per casei =
price paid by purchaser for cases in
case group i
BR
=
base rate, or global average cost
per case
CGWi
=
case group weight for case group i
Oh
=
other adjustors for hospital h
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Step 1: Define Case Groups
Type of Case
Grouping
Data Requirements
Data Sources
No case
grouping
Average cost per hospital
case
Historical hospital budgets; statistical
data; other hospital expenditure
and utilization data
Department
case
grouping
Department average cost per
bed-day; department
lengths of stay
Hospital budgets and cost-accounting
analysis; statistical data; other
hospital expenditure and
utilization data
Diagnosisbased
case
grouping
Department average cost per
bed-day, department
lengths of stay, and other
characteristics of the
hospital or case
Hospital budgets and cost-accounting
statistical data; individual data on
age, sex, ICD-9 or ICD-10 code for
primary diagnosis, length of stay,
surgery, and other characteristics
of the case (such as intensive
care)
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Diagnosis-based Case Grouping
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Case groups bring together cases with both similar
clinical characteristics and resource requirements
for diagnosis and treatment.
A combination of statistical analysis and expert
judgment
Iterations of:
 Combining ICD codes into groups
 Determining the cost distribution within the group
 Recombining ICD codes to improve the distribution (come
close to a relatively tight normal distribution)
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Steps in Diagnosis-based Case Grouping
Step 1. Determine the structure of case grouping
Step 1.1 Create major diagnostic categories
Step 1.2 Group cases into medical/surgical cases
Step 1.3 Group cases into patient age groups
Step 2. Determine the cost distribution across ICD codes
Step 2.1 Determine the average cost per case
Step 2.2 Aggregate cases by ICD-10 code
Step 2.3 Remove outliers
Step 3. Merge clinical and economic criteria to
determine case groups
Step 3.1 Create diagnosis-based case groups
Step 3.2 Calculate average cost per case in each
case group
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Step 2. Cost-Accounting Analysis
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Used to determine unit cost per case
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Allocate the full costs, direct and indirect, from
administrative and ancillary departments to
clinical departments estimate the full unit cost of
a case in that department.
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Step 3. Calculate Case Group Weights

Case group weights reflect the average cost per case in a case
group (i) relative to the global average cost per case.
Average cost per casei
CGWi 
Global average cost per case

For example, a case group weight of 1.2 indicates that these
cases use on average 20% more resources to diagnose and
treat than the average.
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Step 4. Calculate the Base Rate

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The base rate is the global average cost per
hospital case--computed from the hospital pool
A major policy lever in a case-based hospital
payment system:
 Influences the allocation of health care resources
between the hospital sector and other parts of the
health care system,
 Influences the allocation of resources across hospitals
and regions
 Can be a tool to promote equity– e.g. increase resources
in areas that have been historically underfinanced
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Setting the Hospital Pool
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The hospital pool:
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The amount of funds available to the purchaser in one year to pay for
hospital services for all providers included in the payment system;
Excludes direct out-of-pocket payments;
May include funds for capital expenditures or only operational
expenditures.
The hospital pool may be set by:
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Bottom-up costing: but maintains old cost structure; exact
specification of services and calculation of costs is difficult;
Top-down allocation: a fixed % of the health budget is allocated to
hospital sector; % is a policy tool; or
Combination: base pool on estimated resource needs and also fix %
allocation as a policy tool
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Step 5. Information and Billing
Systems
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Information and billing systems are required for hospitals
to record the information about each case to determine
the payment rate, and to document the billing and
payment process
The two main components are established at both the
provider and the purchaser level:
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Hospital case database, including basic discharge information
about each hospital case at each hospital included in the payment
system; and
Financial database, including cost accounting and expenditure
information.
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Step 6. Refine Case Grouping
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Routine revision and refinement of the case groups and
weights to incorporate new data from the case database
into the cost per case estimates, case groups, and case
group weights.
As more data become available from the information
system, case groups can be refined by:
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Increasing the number of case groups;
Increasing the number and range of clinical characteristics used to
group the cases (e.g add comorbidities or severity measures);
Developing supplementary payment mechanisms for outlier cases.
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Practical Applications and
Experiences
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Health Policy Context for a New
Hospital Payment System
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What is the system, organizational, and policy context
of health care services?
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What are the goals of the payment system?
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What conditions must be met and what steps are
required to ensure that the goals will be achieved?
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What changes can be expected in the hospital sector
and other parts of the health care system and
community after the case-based payment system is
introduced?
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Implementation Issues
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Transition to a case-based payment system:
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Transition from budget through other output-oriented
payment system (e.g. per diem)
Incremental inclusion of hospitals
Incremental inclusion of reimbursed costs (e.g. start
with variable costs)
Incremental inclusion of types of cases
Incremental movement from hospital-specific to
system-wide base rate
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Implementation Issues, cont.

Measures to counteract adverse incentives
(increasing admissions, avoiding costly
cases, upcoding, etc.):
Reduction or denial of reimbursement for
hospital readmissions
 Minimum lengths of stay
 Purchaser monitoring /controlling volume of
admissions
 Medical audit or other review processes

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Case Study: Case-based Hospital Payment as
the Trigger for Broad Health Reform in
Kyrgyzstan
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The mandatory health insurance fund (MHIF)
implemented a new case-based hospital payment
system with 13 hospitals in 1997;
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The MHIF leveraged its small amount of money
(about 10% of total health funding) to drive
broader health reform;
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The new case-based hospital payment system only
reimbursed variable costs directly related to
patient care, while the budget still paid for fixed
costs;
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Case Study: Case-based Hospital
Payment as the Trigger for Broad Health
Reform in Kyrgyzstan

Hospitals used the incremental funds to purchase
drugs, supplies, food, and to fund performancebased staff bonuses.
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Resulted in support for health insurance from the
population (copayments for drugs reduced), and
providers (salaries supplemented with bonus
payments).
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Outcomes of Case-Based Hospital
Payment in Kyrgyzstan
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Streamlining of the delivery system--hospital capacity
reduced by at least 40% by 2004;
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Improved allocative efficiency of the health system--share of
health care expenditures to PHC more than doubled from
15 to 38% between 2001 and 2007;
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Increased technical efficiency of hospitals--share of health
expenditures allocated to direct patient care increased from
16to 33% between 2001 and 2007;
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Improved service delivery and quality improvement-hospitals not reimbursed by the health insurance system
unless accredited.
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