DRG SYSTEM AND LENGTH-OF-STAY
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This research examines the relationship between the Diagnosis Related Groups (DRGs) health care reimbursement protocol used by the United States government and the length-of-stay of patients in hospitals. One research question is investigated in this examination. This research question is as follows: "What effects have DRG pricing had on hospital length-of-stay for Medicare patients and for commercial health insurance patients?" This question is analyzed with data for the 1978-1995 period, as this period (1) reflects the length-of-stay experience both prior to and subsequent to the implementation of the DRG system and (2) provides complete data for each of the variables prior to the time that managed care became the dominant force in health care delivery in the United States. As a major objective of managed care is a reduction in the cost of health care services, and as hospital length-of-stay is a major factor in health care cost determinations, the inclusion of data from the dominant managed care period would tend to distort the analysis of the relationship between the FRG system and hospital length-of-stay (Goldman, 1995).By 1982, the regulatory structure for government health insurance for the elderly (Medicare) was based on a new hospital reimbursement methodology and utilization control mechanism in the form of the Peer Review Organization (PRO) program. Soon thereafter (in 1983), the Diagnosis Related Groups (DRG) program of quality an
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G procedures had significant impacts on hospital budgeting. DRG procedures, with respect to funding, are, as noted above, prospective in character. The various cost-based reimbursement procedures, which the DRG procedures replaced, were retrospective in character. Prospective procedures establish the amount of reimbursement prior to the delivery of health care services, while retrospective procedures establish the amount of reimbursement subsequent to the delivery of health care services (Moble & Magnussen, 1998).
The introduction of DRG procedures for use in provider reimbursement created severe budgetary problems for hospitals, regardless of the type of budgeting process employed. With a prospective reimbursement system, hospital administrators must somehow be able to forecast maximum expenditures with a high degree of precision. If they fail to make such precise estimates, the solvency of the organization will become jeopardized. The introduction of DRG procedures for provider reimbursement also restricted the flexibility of both the hospital organization and its administrators (Moble & Magnussen, 1998).
The impacts of the DRG system on hospitals is directly relevant to the relationship between the DRG system and patien
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Approximate Word count = 2354
Approximate Pages = 9 (250 words per page)
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