Recent findings on the DRG system in Europe

This year it is more than 30 years ago that US Medicare adopted the system of Diagnosis Related Groups as part of their Prospective Payment System primarily to control the rapid rising costs of healthcare and as an initial effort to retain the solvency of the Nation’s Medicare Hospital Insurance Trust Fund.

It took until 1988 for the first country outside the USA and the last country to introduce the system was Switzerland on the 1st of January 2012.

Observations and Outcomes

It seems that the frequency of updates of the DRG based systems, revision of the payment rate is going up. That is particularly true for reductions of the rates or changes that have an anticipated savings effect over time. DRG’s follow the cost saving more frequently, more rapidly.

The number of DRG’s has been going up steadily in most countries in an attempt to increase accuracy in the system. The exception is the Netherlands that started of with 100.000 DBC’s (!!) in 2005, reduced to 30.000 by 2010 and now going to 3000. DBC is the Dutch alternative for DRG’s in this Alphabet Soup. With that level it will be closer to the European average of the number of DRG’s in Europe.

Where DRG were covering Hospital (secondary) care, the tendency is now (more) beyond the boundaries of the Hospital, allow for treatment and reimbursement of the full trajectory from primary care through tertiary care, favoring optimization (cost reduction?) of care-giver and care method.

The further introduction of evidence medicine, the increased weight and importance of the EBM, will make product and technology assessment more objective a, provide more (empirical) evidence of efficiency, effectiveness and “necessity”. Not unlike the pharmaceutical industry, that may lead to “Medical Device clusters” of similar functions and effect with a clear preference, leaving behind the sub-optimal devices. This may in time limit the choice of devices and technology. Non- medical decision makers (and payers) will gain weight with the EBM outcomes at hand.

Looking at DRG’s gives a snapshot of the situation today, the “Pay for Performance” schemes, introduced in the various countries are a better insight in the improvement of care, alongside fee for service.

The above provides some initial insight in the idea of using payments and developments to encourage better efficiency, not of parts of the healthcare chain, not individual providers but across the system. More countries are introducing with bundled payments and P4P (Pay for Performance) a system to initiate and encourage the delivery of more coordinated care for patients with multiple care needs. The introduction of new technologies occasionally leads to resistance by the “original owner of the procedure”. The shift from fee’s to devices, for example as a result of the introduction of devices that allow shorter interventions in other places, by other providers, is leading to resistance.

Countries are increasingly focusing on methods to allow for the introduction of technological innovations. Special programs like the German NUB (New Diagnostic and Treatment Methods regulation) provides extra-budgetary funding in the form of “fee-for-service” payments to selected hospitals, a not too easy process that not seldom is the first step in the incorporation of new technology  into the DRG system.

The effects on cost and quality remain the essential considerations to adopt new technologies and other innovations. Scoring new technology, instrumentation and methods (“innovations”) against the following incentives seems to be a decent start.

Reducing cost per patient:

  • reducing length of stay
  • reduce intensity and amount of services
  • allow for hospital focus and excellence

 Increase revenue per patients

  • improve coding
  • apply for additional funding/extra budget

 Improve quality and reputation (competitiveness) of hospital

It is obvious that the increase of quality and the reduction of cost remains the adoption of new devices, technologies and methods.