After the revolution: DRGs at age 30.

1 October 2013 marked 30 years since Medicare began paying hospitals by diagnosis-related group (DRG), arguably the most influential innovation in the history of health care financing. Initially developed as a tool for hospital management, DRGs became the basis of the inpatient prospective payment system that Medicare implemented in 1983. The strong incentives were revolutionary in their impact. Medicare spending growth slowed sharply, and, more remarkable, hospitals posted record profits. After the link between cost and payment was broken, hospitals moved quickly to cut costs. Nevertheless, a literature survey concluded that none of the worst fears about adverse effects on patients were realized. Diagnosis-related groups have also come to define "the product of a hospital" for purposes of benchmarking and risk adjustment. The acceptance of DRG algorithms owes much to their categorical approach, clinical focus, and transparency. The 2 most commonly used algorithms, Medicare DRGs and All Patient Refined (APR) DRGs, typically explain more than 40% of cost variance in inpatient stays, although with considerable range by care category. Because Medicare DRGs are unsuitable for obstetrics, pediatrics, and neonatology, some payers prefer APR DRGs. Diagnosis-related groups have proven to be a suitable basis for payment, as evidenced by widespread use. Common issues include mitigation of adverse incentives, appropriate payment for extremely costly stays, applicability to certain hospitals and care categories, and growing complexity. The DRG experience offers lessons about the effectiveness of financial incentives, the likelihood of adverse effects, the usefulness of case-mix measures, the risks of growing complexity, and the example that sensible policy need not be the domain of any one political party or other entity.

A historical perspective of the spondyloarthritis.

PURPOSE OF REVIEW: The history of ankylosing spondylitis, the main representative of the spondyloarthritides, is dating back to several thousand years BC and recently proven for medieval skeleton by HLA-B27 typing with modern molecular techniques. In modern time, the history of spondyloarthritis (SpA) is characterized by fluctuation between lumping and splitting. Actually, the recent advent of new classification criteria demands to discuss the consequences and clinical implications in the historical context of the development of the concept of SpA including the controversy of lumping and splitting. RECENT FINDINGS: The new Assessment of SpondyloArthritis International Society classification criteria for axial and peripheral SpA are primarily developed to provide support for clinical trials with biologicals and other treatment modalities, which intend to cover the whole spectrum, especially early clinical manifestations of spondyloarthritides. New insights into genetics and the evolving etiological role of Chlamydia in SpA including the most recent finding of the effective combination antibiotic therapy are major advances in the evolving history of SpA. SUMMARY: The concept of SpA is well accepted for the classification, diagnosis, and therapeutic management of a high proportion of individuals with inflammatory rheumatic conditions. For further advances research technologies are now available to enlarge the current body of clinical, immunologic, and genetic studies using pivotal microbiologic research and new antimicrobial therapeutic strategies.

Change in MS-DRG assignment and hospital reimbursement as a result of Centers for Medicare & Medicaid changes in payment for hospital-acquired conditions: is it coding or quality?

CONTEXT: In October 2008, the Centers for Medicare & Medicaid Services reduced payments to hospitals for a group of hospital-acquired conditions (HACs) not documented as present on admission (POA). It is unknown what proportion of Medicare severity diagnosis related group (MS-DRG) assignments will change when the International Classification of Disease, 9th Revision, Clinical Modification (ICD-9-CM) diagnosis code for the HAC is not taken into account even before considering the POA status. OBJECTIVES: The primary objectives were to estimate the proportion of cases that change MS-DRG assignment when HACs are removed from the calculation, the subsequent changes in reimbursement to hospitals, and the attenuation in changes in MS-DRG assignment after factoring in those that may be POA. Last, we explored the effect of the numbers of ICD-9-CM diagnosis codes on MS-DRG assignment. METHODS: We obtained 2 years of discharge data from academic medical centers that were members of the University Health System Consortium and identified all cases with 1 of 7 HACs coded through ICD-9-CM diagnosis codes. We calculated the MS-DRG for each case with and without the HAC and, hence, the proportion where MS-DRG assignment changed. Next, we used a bootstrap method to calculate the range in the proportion of cases changing assignment to account for POA status. Changes in reimbursement were estimated by using the 2008 MS-DRG weights payment formula. RESULTS: Of 184,932 cases with at least 1 HAC, 27.6% (n = 52,272) would experience a change in MS-DRG assignment without the HAC factored into the assignment. After taking into account those conditions that were potentially POA, 7.5% (n = 14,176) of the original cases would change MS-DRG assignment, with an average loss in reimbursement per case ranging from $1548 with a catheter-associated urinary tract infection to $7310 for a surgical site infection. These reductions would translate into a total reimbursement loss of $50 261,692 (range: $38 330,747-$62 344,360) for the 86 academic medical centers. Those cases, for all conditions, with reductions in payment also have fewer additional ICD-9-CM codes associated. CONCLUSIONS: Removing HACs from MS-DRG assignment may result in significant cost savings for the Centers for Medicare & Medicaid Services through reduced payment to hospitals. As more conditions are added, the negative impact on hospital reimbursement may become greater. However, it is possible that variation in coding practice may affect cost savings and not reflect true differences in quality of care.

Historical perspective: the development and use of spinal disease categories.

This historical perspective traces the history of the development of pathoanatomically based spinal disease diagnosis and the subsequent use of these diagnoses for scientific and social purposes. Spinal diagnostic categories have been used positively to guide both clinical (including their use as the primary units of investigation in many epidemiological and evidence-based projects) and basic science (studying the pathoanatomic disease outside of the patient) research programs--the aim being the improvement of patient care and outcomes. They are also used socially to confer/reject acceptability to patient behavior; to justify health policy decisions; to structure medical relationships; to shape medical/institutional infrastructure; to direct patient care via guideline establishment; and to manage health care. The positive and negative implications of the use of spinal disease categories are discussed.

The origins, development, and passage of Medicare's revolutionary prospective payment system.

This article explains the origins, development, and passage of the single most influential postwar innovation in medical financing: Medicare's prospective payment system (PPS). Inexorably rising medical inflation and deep economic deterioration forced policymakers in the late 1970s to pursue radical reform of Medicare to keep the program from insolvency. Congress and the Reagan administration eventually turned to the one alternative reimbursement system that analysts and academics had studied more than any other and had even tested with apparent success in New Jersey: prospective payment with diagnosis-related groups (DRGs). Rather than simply reimbursing hospitals whatever costs they charged to treat Medicare patients, the new model paid hospitals a predetermined, set rate based on the patient's diagnosis. The most significant change in health policy since Medicare and Medicaid's passage in 1965 went virtually unnoticed by the general public. Nevertheless, the change was nothing short of revolutionary. For the first time, the federal government gained the upper hand in its financial relationship with the hospital industry. Medicare's new prospective payment system with DRGs triggered a shift in the balance of political and economic power between the providers of medical care (hospitals and physicians) and those who paid for it--power that providers had successfully accumulated for more than half a century.

Components of Medicare reimbursement.

The history of the Medicare reimbursement system, how it works, and issues related to fraud and abuse are discussed. The statutory charge of Medicare is to ensure adequate reimbursement through a Prospective Payment System (PPS) to cover the costs for providing a given service to Medicare beneficiaries. The PPS was introduced as a way to change hospital behavior through financial incentives that encourage cost-efficient management of resources. The system utilizes a rate of payment in which a hospital is paid a fixed amount that is expected to cover the costs of care while treating a typical patient in a particular diagnosis-related group (DRG). The PPS uses DRGs as payment categories and Major Diagnostic Categories (MDCs) for classifying the DRGs into similar groupings. One of the first steps in DRG assignment is identification of the principal diagnosis represented by an International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) code. The secondary diagnoses (referred to as complications or comorbidities), presence or absence of surgery, age of the patient, and discharge status are the other pieces of information making up assignment of a specific DRG to a patient. A basic knowledge of the Medicare program will help in the understanding of how hospitals will be reimbursed for patient care, as well as how changes in Medicare payment may affect reimbursement. Medicare is one of the largest health insurance providers in the United States. A basic understanding of the Medicare system will provide valuable insights into Medicare reimbursement and the influence it has on a hospital's bottom line.

George Rupert Palmer--DRG carrier and champion.

Prompted by the retirement of the distinguished health economist, researcher and academic, Professor George Rupert Palmer, the purpose of this paper is to reflect upon and acknowledge one of his many contributions to health services research and development. By employing a conceptual framework devised by Kimberly and de Pouvourville (1993) for analysis of the diffusion of innovations, this paper argues that Palmer played a crucial role in the diffusion into and within Australia of a particular casemix method, diagnosis related groups (DRGs). Textual and interview evidence presented in the paper supports the identification of George Rupert Palmer as the principal carrier of DRGs into Australia, and as one of its key champions within Australia.

Structure and performance of different DRG classification systems for neonatal medicine.

There are a number of Diagnosis-Related Group (DRG) classification systems that have evolved over the past 2 decades, each with their own strengths and weaknesses. DRG systems are used for case-mix trending, utilization management and quality improvement, comparative reporting, prospective payment, and price negotiations. For any of these applications it is essential to know the accuracy with which the DRG system classifies patients, specifically for predicting resource use and also mortality. The objective of this study was to assess the adequacy of the three most commonly used DRG systems for neonatal patients-Medicare DRGs, All Patient Diagnosis-Related Groups (AP-DRGs), and All Patient Refined Diagnosis-Related Groups (APR-DRGs). A 2-part methodology is used to assess adequacy. The first part is a descriptive analysis that examines the structural characteristics of each system. This provides a framework for understanding the inherent strengths and weaknesses of each system and for interpreting their statistical performance. The second part examines the statistical performance of each system on a large nationally representative hospital database. The analysis identifies major differences in the structure and statistical performance of the three DRG systems for neonates. The Medicare DRGs are structurally the least developed and yield the poorest overall statistical performance (cost R2 = 0.292; mortality R2 = 0.083). The APR-DRGs are structurally the most developed and yield the best statistical performance (cost R2 = 0.627; mortality R2 = 0.416). The AP-DRGs are intermediate to Medicare DRGs and APR-DRGs, although closer to APR-DRGs (cost R2 = 0.507; mortality R2 = 0.304). An analysis of payment impacts and systematic effects identifies there are major systematic biases with the Medicare DRGs. At the patient level, there is substantial underpayment for surgical neonates, transferred-in neonates, neonates discharged to home health services, and neonates who die. In contrast, there is substantial overpayment for normal newborns. At the facility level, there is substantial underpayment for freestanding acute children's hospitals and major teaching general hospitals. There is overpayment for other urban general hospitals but this pattern varies by hospital size. There is very substantial overpayment for other rural hospitals. The AP-DRGs remove the majority of the systematic effects but significant biases remain. The APR-DRGs remove most of the systematic effects but some biases remain.

Biologizing social facts: an early 20th century debate on Kraepelin's concepts of culture, neurasthenia, and degeneration.

This paper uses an historical approach to elucidate two alternative modes of conceptualizing the relation between social factors and psychological phenomena perceived as pathological. The core features of Neo-Kraepelinian psychiatric nosology associated with the introduction of DSM-III in 1980 were also at the center of a debate in early 20th century Germany. The protagonists were Emil Kraepelin and Oswald Bumke. Kraepelin's empirical research selectively focused on somatic factors as independent variables, such as alcohol, syphilitic infection, and heredity. The ensuing nosology marginalised social factors which might contribute to the etiology and symptom formation of psychiatric conditions. For Bumke, the disorders in question (including the category of neurasthenia) did not represent qualitative deviations from normal psychological states, but quantitative variations of ubiquitous psychological functions caused by a multitude of somatic, psychological, and social factors. The main arguments of the historical debate are reconstructed, with special regard to the professional and political context. The paper illustrates the importance of context-bound pre-'scientific' decisions for the process of formulating theoretical concepts in psychiatry and related disciplines.

Impact of DRGs on the medical profession.

OBJECTIVE: To present an overview of the history of diagnosis-related group (DRG) reimbursement and its impact on physicians and hospitals. DATA SOURCES: Recent research articles on reimbursement and medical ethics. STUDY SELECTION: Not applicable. DATA EXTRACTION: Performed by the author. DATA SYNTHESIS: The DRG system is part of a system developed at Yale University to provide hospitals with incentives to control costs. Hospital Medicare inpatients are classified into groups that are clinically coherent and homogenous with respect to resource use. The classification is also dependent on principal and secondary diagnoses and procedures, age, gender, and discharge status of the patient. Reimbursement is determined by the classification. Hospitals can create excess revenues by treating the patient more efficiently and economically, or they can absorb monetary losses by doing otherwise. It is argued that hospitals will become more frugal and that physicians will adjust their methods of practice as well. Hospitals that fail to adapt will close, reducing overall Medicare expenditures and deterring inefficiency by example. CONCLUSION: DRGs provided a way to prevent the collapse of the Medicare program but have also required stricter criteria for hospital admissions. DRGs remain in evolution and under evaluation for expansion into other health care settings.

Triage for health care in a metropolis: Paris under Napoleon.

Paris under Napoleon offers the earliest example of medical patient triage in a metropolis. A central admitting office opened at the Hotel-Dieu of Paris in 1801 under the supervision of a municipal hospital council. It admitted about 22,000 patients in the first eighteen months. This number represented about 44% of all applicants; another 16,000 were admitted to various hospitals as emergencies; the rest were treated as outpatients and helped on the spot or referred to district welfare offices, dispensaries, and nursing homes. Thus the historian can discern a concerted effort by hospital authorities to keep indigent patients out of the hospital.

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.

ICD, POR, and DRG. Unsolved scientific problems in the nosology of clinical medicine.

A system of scientific classification should have a suitable basic axis of organization, standardized names, clearly specified operational criteria, and multiaxial arrangements for citing important attributes beyond those included in the basic axis. During the past century, the main nosologic system for identifying human ailments has been the International Classification of Diseases (ICD), which has a well-organized and well-accepted nomenclature, but which lacks operational criteria and an appropriate multiaxial pattern. Two new systems of classification during the past two decades are intended for other purposes and would not be satisfactory as nosologic substitutes. The Problem-Oriented Record (POR) does not have a standardized nomenclature or criteria; and the Diagnosis-Related Group (DRG) approach was organized mainly for fiscal goals. As the basic taxonomy used for classifying human ailments, the ICD needs substantial improvement to fulfill its scientific role in statistics for the occurrence and treatment of disease.