hospitals appear to be more "production" oriented, DRG hospitals are more "management" oriented. At 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 For with in-house systems were in error; whereas hospitals using - shared systems had an error rate that averaged 54 percent. C. Economic And Financial Impact Of The DRG System Although a substantial portion of the analytical work regarding the economic and financial impact of the DRG system is in progress, several interesting results have already emerged. To begin with, a rather extensive analysis was completed of the costs of operating the system or more precisely, the costs of producing an inpatient bill under the new system. For the hospitals studied, the additional average annual cost associated with the system was estimated to be $91,092. On a per case basis, this translates into an average incremental cost of $7.23 per discharge. When added to the average base cost of $15.93, the average total cost of creating a bill under the DRG system reaches $23.16. Turning to the financial impact of the system, it appears that DRG hospitals have fared comparatively well. In 1980, for example, 46.5 percent of the non-DRG hospitals had a loss from operations, yet only 19.2 percent of the DRG hospitals reported such a loss. Further, 26.3 percent of the non-DRG hospitals had a net loss and only 15.4 percent of the DRG ones did. This contrasts to the situation in 1979 when 46.5 percent of the nonDRG hospitals and 57.7 percent of the DRG hospitals posted operating losses, 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. Even though DRG hospitals had more money on the books than their counterparts who were still being reimbursed on a per diem 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 differs marketedly from other state reimbursment programs. In - fact, although several other states (e.g., Maryland and Georgia) have in place reimbursement systems which use DRGs for making rate adjustments, New Jersey is the only state to have applied a DRG-based system to all acute care general hospitals and classes of payers. With this in mind, the evaluation effort focused on two related questions. First, from a political standpoint, how did this rather sweeping policy innovation come about? And second, is there something truly unique about New Jersey that allowed for the development of such a system, or can we expect to see the system diffuse to other states? In order to answer these questions, the evaluation team's political scientists gleaned data from newspaper clippings, position papers, government documents, and, most importantly, conducted extensive interviews with all of the key participants. [3] From their research emerged both a detailed chronology of events as well as a careful examination of the actors and institutions that shaped them. article. Unlike some of the other, more quantitative, portions of the evaluation, it is difficult to adequately capture the answers to the two questions posed above in the limited scope of this survey However, in response to the question regarding the evolution of the system, the analysis points to a confluence of factors which acted to create the conditions required for the advent of the system. Among the more salient elements responsible for the system's introduction were: (1) pressure from Blue 22-020 0-83--5 Cross, whose premiums are regulated by the state, to control reimbursement rates to hospitals, (2) the publication of a report charging that the hospital industry in New Jersey was, in effect, regulating itself, (3) the election of a new Governor and his subsequent appointment of a Commissioner of Health who was determined to bring rate regulation within the state's purview and to restructure the incentives that hospitals faced, (4) the availability of a federal grant for developing an experimental reimbursement program, and (5) the poor financial positions of the state's urban hospitals. In addressing the question of whether or not the New Jersey system could potentially be transferred to other states, the authors of this part of the evaluation noted in their conclusion that: "New Jersey was unique. What happened there will not While much remains to be learned from the New Jersey experience with the DRG system, in short, it is our view that the system has led, and will continue to lead, to the adoption of |