In an attempt to ascertain whether or not the formula was being applied correctly, a statistical analysis was conducted to see if there were variables that describe hospital characteristics, in addition to teaching status which has already been incorporated into the rate-making process, that should be included in the program, so as to improve the incentive structure. The evaluation team found that although some of the variables considered (e.g., size, location, etc.) did in fact lead to statistically significant reductions in unexplained variance in the dependent variables (i.e., cost and length of stay), the size of the reductions were small and therefore the additional complexity that would inevitably accompany their inclusion into the program could not be justified. Furthermore, the analysis confirmed that, in terms of both cost and length of stay, it is indeed appropriate to compute DRG rates separately for teaching and non-teaching hospitals. The next design factor studied was the way in which hospital costs were "mapped" into specific DRGs. The primary conclusion reached in this segment of the evaluation was that, with a few relatively minor exceptions, the cost accumulation, cost finding, and cost allocation processes used in the DRG system are consistent with traditional cost accounting definitions and concepts. It was Several specific problems, however, were identified. found, for example, that some of the terminology used in the 1979 Department of Health regulations is inconsistent with traditional cost and hospital accounting usage (e.g., employee fringe benefit ced as a direct patient care costs). In addition, stitutional costs considered to be unrelated to patient , employee health insurance) should instead be regarded ndirectly related. Lastly, the 1979 regulations de 1 direct care costs to be 100 percent variable and costs to be 100 percent fixed. This doesn't accurately he way in which these respective cost functions actually t should be pointed out that many of these issues were by the Department of Health in subsequent regulation nt. t Of The System On Hospital Operations econd major area of investigation undertaken by the ers centered on how the imposition of the DRG system I the ways in which the hospitals function. First, using ed sample of DRG and non-DRG hospitals, an examination of pact of DRGS on the hospitals' organizational structures cesses was conducted. Briefly, the following observations de: 1) decision-making authority in DRG hospitals is more -alized than is the case in non-DRG hospitals; 2) the ance of the medical records department has increased dramain DRG hospitals due to the additional and more complex ons they've been called upon to perform, and the better d people required to execute them; 3) the medical staff in RG hospitals is more directly involved in hospital opera= 4) the quantity and type of information collected in DRG hospitals appear to be more "production" oriented, DRG hospitals are more "management" oriented. At C. Economic Althoug regarding t in progress To begin wi For costs of op producing a hospitals S with the sy basis, this Another portion of the evaluation, which merits discussion here, looked at the quality and timeliness of the data generated to meet the requirements of the system. An important general finding was that the data produced once the DRG system was imposed were more accurate than was the case prior to the system's introduction, yet they took considerably more time to produce. instance, in the eight DRG hospitals studied, the face sheet incompletion rate dropped from 22.8 percent to 15.8 percent. the same time, however, the amount of time required by the medical records departments to complete the abstracting process and submit the data for billing increased from 4.5 days to 5.3 days. Additionally, the amount of time it took patient accounting to release the bills went from an average of 6.5 days to 8.5 days after discharge. It's likely that as hospitals become more experienced with the system, the time required to process all of the requisite data will decrease. The study also concluded that those hospitals with in-house computer systems were able to generate bills with fewer errors and in a shorter period of time than hospitals which used shared service systems. For example, although 40 percent of the bills generated by all hospital computer systems contained errors, an average of only 15 percent of the bills produced by hospitals per dischar the average reaches $23 Turning that DRG ho example, 46 operations, such a loss a net loss contrasts t DRG hospita ting losses se systems were in error; whereas hospitals using ems had an error rate that averaged 54 percent. è And Financial Impact Of The DRG System gh a substantial portion of the analytical work the economic and financial impact of the DRG system is s, several interesting results have already emerged. ith, a rather extensive analysis was completed of the operating the system or more precisely, the costs of an inpatient bill under the new system. For the studied, the additional average annual cost associated system was estimated to be $91,092. On a per case is translates into an average incremental cost of $7.23 arge. When added to the average base cost of $15.93, age total cost of creating a bill under the DRG system $23.16. ing to the financial impact of the system, it appears hospitals have fared comparatively well. In 1980, for 46.5 percent of the non-DRG hospitals had a loss from ons, yet only 19.2 percent of the DRG hospitals reported loss. Further, 26.3 percent of the non-DRG hospitals had oss and only 15.4 percent of the DRG ones did. This ts to the situation in 1979 when 46.5 percent of the nonspitals and 57.7 percent of the DRG hospitals posted operaosses, and 25.4 percent and 42.3 percent had net losses, respectively, In short, the financial standing of the non-DRG hospitals remained, as a whole, roughly the same for 1979 and 1980, whereas the financial positions of the DRG hospitals were considerably improved. Additionally, between 1979 and 1980, total operating expenses rose, on average, by 13.2 percent in the DRG hospitals and 13.8 percent in the non-DRG ones. Both of these figures are well below the average 18.7 percent increase in operating costs that was incurred by all hospitals nationwide during the same period. In this regard, however, it should be noted that for several years prior to the arrival of DRG-based reimbursement, increases in operating costs in New Jersey hospitals were below the national average. differs mar - fact, altho have in pla rate adjust DRG-based s of payers. two related did this ra second, is allowed for see the sys In ord political s tion papers ted extensi a per diem From their as well as Even though DRG hospitals had more money on the books than their counterparts who were still being reimbursed on basis, their liquidity had been reduced. Much of the reduced liquidity can be traced to the fact that the DRG hospitals' accounts receivable increased. The increases in accounts receivable are primarily due to delays in generating bills (discussed earlier) and the longer time taken by payers to pay and process claims. Again, these delays can be expected to dissipate as hospitals and payers become better acquainted with the workings of the system. D. Political Evolution Of The System It should be clear by now that the New Jersey DRG system that shaped Unlike evaluation, the two que article. H evolution d factors whi advent of t sible for 22-020 0-8 |