Development and application of a population-oriented measure of ambulatory care case-mix.

This article describes a new case-mix methodology applicable primarily to the ambulatory care sector. The Ambulatory Care Group (ACG) system provides a conceptually simple, statistically valid, and clinically relevant measure useful in predicting the utilization of ambulatory health services within a particular population group. ACGs are based on a person's demographic characteristics and their pattern of disease over an extended period of time, such as a year. Specifically, the ACG system is driven by a person's age, sex, and ICD-9-CM diagnoses assigned during patient-provider encounters; it does not require any special data beyond those collected routinely by insurance claims systems or encounter forms. The categorization scheme does not depend on the presence of specific diagnoses that may change over time; rather it is based on broad clusters of diagnoses and conditions. The presence or absence of each disease cluster, along with age and sex, are used to classify a person into one of 51 ACG categories. The ACG system has been developed and tested using computerized encounter and claims data from more than 160,000 continuous enrollees at four large HMOs and a state's Medicaid program. The ACG system can explain more than 50% of the variance in ambulatory resource use if used retrospectively and more than 20% if applied prospectively. This compares with 6% when age and sex alone are used. In addition to describing ACG development and validation, this article also explores some potential applications of the system for provider payment, quality assurance, utilization review, and health services research, particularly as it relates to capitated settings.

Improving DRGs. Use of procedure codes for assisted respiration to adjust for complexity of illness.

Medicare's diagnosis related groups (DRGs) payment system has been criticized for not making adequate allowances for severity of illness differences within DRGs. The respiratory diseases major diagnostic category (MDC) has been a particular target; therefore, ability of several procedure codes that identify patients with assisted respiration (temporary tracheostomy, endotracheal intubation, and mechanical respiratory assistance) to identify high-cost patients in that MDC was examined. Total charges were used as the dependent variable in a 10% sample of Medicare hospital discharges from 1985. A consistent and strong association was found between the procedures and total charges for both Medicare "outliers" and "nonoutliers." Patients requiring either intubation or mechanical respiratory assistance had average charges two to three times higher, and patients with tracheostomy four to five times higher than charges for patients without assisted respiration. Patients with assisted respiration tended to resemble each other more than they resembled the other patients in their respective DRGs without assisted respiration. These findings provide the basis for recent revisions in Medicare's classification scheme for the respiratory diseases MDC.

DRGs: from development to applications in the Department of Defense.

The evolution of Diagnosis Related Groups (DRGs) is discussed briefly. Use of DRGs for resource allocation in the Veterans Administration is examined. Implications of the use of DRGs for resource allocation and other management functions in the Department of Defense are discussed.

Improving the homogeneity of diagnosis-related groups (DRGs) by using clinical laboratory, demographic, and discharge data.

For 48 of the most common diagnosis-related groups (DRGs) at our hospital, we examined the ability of clinical laboratory tests, demographic data, and ICD-9-CM codes, which provide a measure of severity of illness, to predict patients' length of stay (LOS) more accurately than DRGs alone. For 10 of 20 medical DRGs and 13 of 23 surgical DRGs examined, we were able to increase the ability to predict LOS by at least 10 per cent. The laboratory tests that proved most predictive of LOS over all DRGs were the mean serum sodium, potassium, bicarbonate, and albumin. The system is data driven, objective, and flexible, thus ensuring its utility for the purpose of equitable reimbursement.

Diagnosis related group 'all payor' hospital payment and medical diseases. Financial risk and hospital cost in medical noncomplicating condition-stratified diagnosis related groups.

There are many health policy issues related to diagnosis-related group (DRG) hospital payment. Previous work by our group had suggested that some DRGs did not adequately comorbidities. Despite recommendations by federal advisory committees, the secretary of Health and Human Services has proposed no major changes to DRGs along these lines. We analyze resource consumption in any of the 88 non-complicating condition (CC)-stratified medical DRGs using the DRG prospective "all payor system" in effect at our hospital. Analysis of 12,340 medical patients by payor (Medicare, Medicaid, Blue Cross, and commercial insurance) in these non-CC-stratified medical DRGs for a three-year period demonstrated that patients with more CCs per DRG for each payor generated higher total hospital costs, a longer hospital length of stay, a greater percentage of procedures per patient, higher financial risk under DRG payment, and a higher mortality, compared with patients in these same DRGs with fewer CCs. These findings suggest that new prospective DRG all payor systems may be inequitable to certain groups of patients or types of hospitals vis-à-vis the non-CC-stratified medical DRGs. Health policy leaders should be encouraged to stratify many medical DRGs by the numbers and types of CCs to more equitably reimburse hospitals under DRG all payor systems.

Case mix for nursing home payment: resource utilization groups, version II.

A study of 3,427 nursing home residents in New York State, measuring both resources used and resident characteristics, was used to develop a resident classification system for payment purposes. The system balances clinical, statistical, and administrative criteria, making it useful both for the New York State Medicaid payment system and for quality of care and facility management.

Use of specialty psychiatric settings in constructing DRGs.

Characteristics of a psychiatric setting, such as staffing intensity and scope of services, are examined to see if they contribute to explaining variation in length of stay over that explained by commonly available patient descriptors. For short-stay admissions (less than 31 days), only a small improvement in predictive ability was found. Implications for prospective payment systems are discussed.

Prior hospitalization experience of DRG outliers versus inliers.

The Diagnosis-Related Group (DRG)-based Medicare Prospective Payment System has raised a number of concerns. One major concern has centered on both the definition of outlier patients and how hospitals are to be paid for their care. The epidemiology of outlier patients, however, has received relatively little attention. Using a retrospective database, we constructed a case control study in which the cases were DRG outliers and the control patients were DRG-matched inlier patients. We then examined both the prior hospitalization experience of outlier patients and inlier controls, and the prior outlier experience of the attending physicians of outlier patients and inlier control patients. We demonstrated that DRG-based outlier patients were more likely to have had prior admissions to the hospital as compared with DRG-matched inlier control patients. Moreover, DRG-matched outlier cases were more likely to have had prior outlier admissions as compared to controls--an effect that was more pronounced when only the subset of patients who actually had a prior admission was evaluated. Finally, physicians of the DRG outlier patients were more likely to have had previous outlier patients than physicians of the DRG-matched inlier control patients. In summary, we were able to demonstrate that DRG-based outlier patients have a different prior admission and outlier experience than DRG-matched inlier control patients. However, because we showed the same relationship when we evaluated the outlier experience of physicians of outlier patients as compared to physicians of DRG-matched inlier controls, we were unable to determine if the effect was patient- or physician-based.(ABSTRACT TRUNCATED AT 250 WORDS)

Should DRG assignment be based on age?

The present Medicare Diagnosis Related Group (DRG) classification system contains 95 DRG pairs, where one DRG of the pair contains patients within a distinct diagnostic category who are under 70 years of age with no comorbidities or complications (CCs). The other DRG of the pair contains patients in the same diagnostic category who are over 69 or who have CCs. This study examines whether it is appropriate for reimbursement purposes to group those patients who are 70 years of age or older but have no CCs with patients who have CCs. Our findings show that age alone, in the absence of CCs, increases length of stay and cost of care only slightly. In fact, using only CCs as a classification variable reduces the within-group variance more than the present classification based on both age and CCs. Therefore, it is inappropriate to group Medicare patients who are older than 70 years of age without CCs with Medicare patients who have CCs.