As Amir Inbar of Mediclever explained in the first part of this
article, "if you've heard of about medical
reimbursement, then you've probably come across the term 'DRG
code.' " (DRG
stands for disease-related group.)
In this article (the second in the series), Amir explains how a DRG
is set.
As I described in part 1 of this article, a
DRG code provides the same amount of reimbursement (with some modifications)
to all hospitals treating patients that belong to a certain
disease group.
To form such a unified payment system, each country
implementing the use of DRGs form a central entity that
is responsible for DRG payment. This central entity receives the following information
from hospitals throughout the country (for each conducted treatment):
--
the patients'
relevant disease group
--
the total cost of resources required for the patients'
treatment in the hospital
By way of example, the graph below depicts
three hospitals, each treating a patient from the same
disease group (e.g., Coronary Bypass w/Cath); however, as illustrated,
each hospital has a slightly different cost structure.
Hospital #1 spends the highest amount on capital equipment,
but its overall costs amount to $550. Hospital #2 spends less on capital
equipment, but has the highest overall costs ($900), due to the cost of
its operations. Hospital #3 presents the lowest cost structure, only
$450 per patient.
At the end of the year, the central entity analyzes the
data received from all the hospitals and sets the average treatment cost.
In the example above, the average cost is set at $633 (green line).
The central entity then determines the reimbursement sum that will be
paid to all hospitals treating patients from the same disease group,
regardless of their actual costs.
The graph below adds the unified reimbursement
sum and shows the consequences each hosptial will face.
As shown in the graph, the reimbursement sum was
set at $700 (red line). Therefore, every hospital in the country will
always receive $700 for treating a patient belonging to the same disease
group (Coronary Bypass W Cath).
Hospital #3 makes a profit of
$250 for each treatment; Hospital #2 loses $200 on each procedure; Hospital
#1 makes a $150 profit.
As a result, Hospital #2 can either close down its department or increase
its effectiveness and efficiency in order to reduce its losses.
Indeed,
under a DRG-based reimbursement system, hospitals are under constant pressure
to decrease costs and increase efficiency.
In the next and final section of this series we will see how a DRG-based
system affects a company's strategy for obtaining reimbursement for a
new medical device.
About Mediclever Mediclever
manages end-to-end reimbursement projects for Israeli companies selling medical
technology products in the United States and Europe.
Mediclever identifies the availability of existing reimbursement codes (relevant
to the product), and in case such existing mechanisms
do not exist, Mediclever outlines processes and criteria for obtaining coverage,
including the development of new or modified codes and the establishment of favorable
coverage guidelines for such codes.
Mediclever appoints an outsourced reimbursement project
manager for each Israeli client. The manager works at the client's site and leads
the leading the reimbursement project, which saves the company from
hiring and training a full-time reimbursement manager.
