) Satisfying judgments for malpractice awards by a reserve fund administered by alth and Human Services, thus making the U.S. Government the insuror with a Ely larger statistical group; and Self-insurance by groups of hospitals (as is now the case of five Connecticut pitals and organized by the Yale University Medical Center). YSICIANS CAN REDUCE THE RISK OF MALPRACTICE SUITS BY REESTABLISHING A GOOD have interviewed a trial lawyer in Connecticut who is active in the field of mal- he lawyer described interviews with over 60 clients who were contemplating al action for malpractice. In a surprisingly large number of cases, the client specd that the attending physician was not to be sued because he was a long-time respected family doctor and friend. In many of the other cases Dr. Arterton perded the client to drop any plans for litigation because of the poor chance of reery from the hospital involved. he lesson to physicians is clear. Re-establish the good bedside manner of your decessors. only a single case (Saint Raphael's Hospital) did a client show the same personriendship for a hospital. In the case of this hospital, an extraordinarily good lic-relations effort has brought close friendship with the community. he conclusion is clear. The Congress and the Administration must find means of inishing the devastating threat of malpractice claims. SOME F ABSTRACT After bursement p an overview the system. design, the and financi The authors progress, hospital ma BACKGROUND Since to a unique ducing heal applies to all classes Groups (DRG patients wh equivalent similar amo have the pr sicians are their clini management Janet B. Arterton, Esq., a partner in the firm of Garrison, Kahn, Crane, and Silbert, located [ew Haven, Conn. Under determined RELIMINARY KESULTS FROM THE NEW JERSEY DRU EVALUATION (By J. Joel May and Jeffrey Wasserman) providing a brief description of how the DRG reimrogram operates in New Jersey, the authors present of the findings from a comprehensive evaluation of The discussion focuses on aspects of the system's effect of DRGS on hospital operations, the economic al impact, and the system's political evolution. conclude that, although the evaluation is still in t appears that the system has led to improvements in nagement which may ultimately imply cost savings. 1980, 26 hospitals in New Jersey have been exposed e and innovative method of reimbursement aimed at re1th care expenditures. The new program, which currently O all of the state's acute care general hospitals and es of payers, is based on the use of Diagnosis Related RGs). In essence, a DRG is a homogeneous grouping of who, in the opinion of physicians, require roughly t regimens of care and hence are believed to consume mounts of hospital resources. They are asserted to property of being "medically meaningful" in that phyare able to distinguish between them on the basis of inical attributes and associate particular patient nt processes with them. der this system, hospitals receive a prospectively ned, DRG-specific rate for each case treated. The precise eans by which these rates are calculated is explained below. In tes regardless of the costs they incur in treating patients. Although the de The appeal of the system has recently received recognition n the federal level through Secretary of Health and Human Serices Schweiker's proposed plan to reimburse hospitals for treaing Medicare patients on the basis of DRGs. ails of the proposal have yet to be unfurled, it differs from he New Jersey system in two important respects. First, while in ew Jersey 100 percent of the patients are covered by the system, t will typically be the case that some 25 percent or less of the atients nationwide are covered by Medicare. Since gearing up or the system frequently involves rather significant expendi- between pay a particula costs of ca unpaid cost some states improve ef present in Neverthele experience contemplat cularly if treatment sive DRG r CALCULATIO Prior Jersey DRG rates are begins for base (PCB) expenses, seek reimb services derived b viously r For examp rs. In most other states, if the approved price for to Blue Cross). Thus, the incentive to reduce costs, ION OF THE DRG RATES or to discussing the results of our evaluation of the New RG system, it is appropriate to describe exactly how DRG -e formulated. Briefly, the DRG rate-setting process for hospitals with the establishment of a preliminary cost CB). The PCB is an estimate of the allowable annual s, and other financial items, for which the hospital may imbursement from patients and third-party payers for the es they provide in the coming year. This estimate is d by the New Jersey State Department of Health from prey reported (actual) hospital financial and case-mix data. xample, for the 26 hospitals that started the program in 1 80, 1978 data were used to arrive at the 1980 rates. The ecific financial elements included in the PCB are: direct tient care costs, indirect costs, provisions for the replace- The calculation of the direct care costs component of the B is relatively complex. By far, the bulk of these costs are tributable to treating inpatients who, as noted above, are signed to DRGs. The process of determining the direct patient re costs from the current year's cost base (again, for developg the 1980 PCB, 1978 was the "current" year), relies on various easures of resource use" (MRUs). Given the problems associated th determining the true cost of treatment, MRUS serve as oxies for actual resource consumption. For instance, patient ys are presently used to estimate nursing costs, the assumption ing that equal amounts of nursing resources are consumed daily gardless of diagnosis, age, or other factors. [1] MRUS can therefore be used to indicate the cost of services pplied by hospital cost centers to each DRG, and ultimately DRG tes per case. This is accomplished by first computing the tio of MRUs consumed by all patients within a given DRG to the tal number of MRUS provided by the cost center. Next, the tio is multiplied by the total cost of operating the center in estion to obtain the total cost associated with caring for tients in the DRG. The result is then divided by the number of patients Suppc a total of in deliver pediatric assume tha $1,000,000 and the co (a) (b) The providing nursing c apportion for DRG # Once determine direct ca this, the additiona and a sta the avera system (c pitals an |