Analysis of domestic hospital case mix with diagnosis related groups

Abstract

A rapid increase in medical costs has become one of the most critical problems in the korean health care system. Hospital services, the largest single component, should be targeted in efforts to contain inflation in medical costs. It is necessary to define what a hospital produces and to specify appropriate case mix measures of the products to predict, explain and control hospital performance,. The primary objective of this study is to develop the korean Diagnosis Related Groups (K-DRGs) as an appropriate case mix measure of domestic hospitals by modifying the US-Refined DRGs according to medical practice pattern and medical information system in domestic hospitals. The secondary objective is to analze case mix and performance in domestic hospitals using the K-DRGs and to provide an application of the K-DRGs in containing medical costs. The finally constructed K-DRGs consist of 923 groups, compared to 1, 114 groups for the US-DRGs. An empirical evaluation supports the validity of the K-DRGs for application to the domestic hospitals. The national features of case mix and resource use by K-DRG are described, and the regression results indicate that hospital characteristics have a substantial influence on both case mix complexity and hospital performance measured by scalar K-DRG indexes related. Finally, as an application of the K-DRGs, a claim review and payment model using the K-DRGs is developed to improve the current review system of the nationwide medical insurance. An empirical test indicates that the proposed system can enhance the efficiency of the claim review, and that it can be an effective method to contain medical costs and to promote optimal care by establishing a useful mechanism for monitoring hospital performance.