- Email: [email protected]
Prospective payment and pediatric intensive care
EDITOR'S COLUMN
Prospective payment and pediatric intensive care Prospective payment systems are fixed-payment systems for hospital care and were conceived on the premise that hospital costs can be predicted for subsets of patients. These systems were designed to check the rising cost of health care by encouraging hospitals to operate efficiently. Until recently, most pediatricians and pediatric hospitals had been spared the prospective payment concerns that have plagued our adult medicine colleagues for the last decade. However, as more and more states in the United States adopt prospective payment systems, pediatricians must not fail to understand their impact on pediatric health care. The method of calculation of reimbursement in different prospective payment systems varies widely. However, in most systems, patients are assigned a diagnosis-related group classification based on their constellation of diagnoses and procedures. Age, sex, and comorbidities are also factors for a few DRGs. These groupings were derived to represent homogeneous subsets with respect to hospital length of stay as a proxy for hospital cost. Each DRG has an associated weight derived by dividing the average hospital cost per discharge (historically) to provide care for patients in that sPecific DRG by the average hospital cost per discharge for all cases across all DRGs. Reimbursement to hospitals for individual patients is calculated by multiplying the average cost per discharge across all cases in all DRGs as a base rate by the individual patient's DRG-associated weight. This reimbursement rate is then adjusted by using a number of other variable adjustment factors. These adjustments sometimes include an urban wage index factor based on local labor costs, a graduate medical education allowance for teaching hospitals, an adjustment based on the number of hospital beds, and an adjustment for outliers, short-stay cases, and transfers to other hospitals. Other modifications that have been used include adjustments to protect rural hospitals that must compete with urban hospitals for labor, hospitals that serve as sole community providers, hospitals that serve a disproportionate share of low income patients, and rural referral centers. Some states and systems have Reprint requests: Debra H. Fiser, MD, Arkansas Children's Hospital, 800 Marshall, Little Rock, AR 72202-3591. THE JOURNALOF PEDIATRICS1993;123:411-2. Copyright | 1993 by Mosby-Year Book, Inc. 0022-3476/93/$1.00 + .10 9/21/49587
also used adjustments for variable severity of illness, which may or may not be disease specific and may consider severity during all or only part of hospitalization. Some systems also allow for capital depreciation. Pon et al. report in this issue of THE JOURNAL that, under New York State all-payer prospective payment guidelines, pediatric tertiary intensive care services in their hospital resulted i n a loss of more than $400,000 per PICU bed per year. These dismal findings are not surprising in light of previous work demonstrating significant losses under DRG payment systems for teaching hospitals or public institutions, 1 hospitalized pediatric patients in general, 2 pediatric patients with more comorbidities,3 Medicaid patients, 2 black and Hispanic pediatric patients, 4 emergency admissions, 5 and adult intensive care unit 6 and trauma admissions. 7 Most PICUs are located in teaching hospitals, s Most PICU admissions are emergency admissions, and admissions for trauma are common. 9 Minorities are served disproportionately by PICUs, compared with predictions from population statistics, as are Medicaid patients. 9 In addition, most patients admitted to a PICU have one or more comorbid conditions. 9 See related article, p. 355.
I
DRG PICU
I
Diagnosis-related group Pediatric intensive care unit
Although, in theory, hospitals with an "average" case mix could offset PICU admissions with less severely ill patients to balance their "bottom line," tertiary pediatric teaching hospitals are unlikely to achieve this aim. In either case, this system creates serious financial disincentives to hospitals for the provision of pediatric intensive care services. As hospital administrators with shrinking operating margins are increasingly forced to watch the bottom line, the expected impact will be a reduction of services provided by smaller hospitals with a shift of these patients to tertiary care institutions. Increasing losses by tertiary care institutions will be expected to curtail significantly the ability of PICUs to provide state-of-the-art technology and to retain experienced personnel. Although some increased efficiency may be realized to blunt the fiscal impact, 1~ hospital adminis-
411
4 12
Fiser
trators will surely balk at upgrading and expanding services, regardless of need, in deference to more profitable ventures. 11 Critically ill children and their families will fall victim as unavailability of services produces less-than-optimal outcomes, with, ironicallyl even greater costs to society for rehabilitation and loss of productivity. Simply stated, Port et al. have demonstrated that costs exceed reimbursements for P I C U patients. However, it is important to ask whether reimbursements are too low or costs too high. Were the "industry standards" used by the authors to calculate cost realistic? Hospital costs are rising at two to three times the rate of inflationl2; how much increase is necessary to keep up with advances in technology? More important, how much does keeping up with technology improve outcome? We must also consider the intangible cost of failing to produce a good outcome. On the other side of the coin, are the DRGs inappropriately weighted to deal with this subset of critically ill children or are the adjustment factors for their hospital's reimbursement inadequate to recoup costs? Undoubtedly, each of these factors contributes to the problem. Few would disagree that something must be done to contain health care expenditures in the United States, but prospective payment, in its present form, may not be the best answer. The goal of health care reform is to create a health care system that is comprehensive, accessible, coordinated, continuous, and efficient. Efficiency implies producing the best outcome at the most affordable cost. For pediatric intensive care, regionalization, in combination with coordination of care by pediatric critical care medicine specialists, is the key to efficiency. An inequitable prospective payment system will undermine the goal of regionalization. A n y changes i n health care delivery aimed at cost containment must be examined with regard to impact on outcome. Additional funding is desperately needed for research on outcomes, treatment effectiveness, and technology assessment. Guidelines have already been developed for PICUs in the form of standards for facilities providing various levels of care.13 As a next step, outcomes research must be used to construct triage and referral guidelines detailing which Patients may appropriately be cared for in facilities of varying capability. Finally, an equitable payment system must evolve by using more specific severity indexes or comorbidities, or both, to match reimbursement more closely to the origin of the costs in tile intensive care unit, rather than assuming that the mix of all cases will provide adequate reimbursement. Without significant system modifications, many tertiary care pediatric institutions will be unable to survive in a prospective payment environment, much less continue to pro-
The Journal of Pediatrics September 1993
Vide leadership in provision of state-of-the-art health care and research.
Debra H. Fiser, MD Professor and Chief Pediatric Critical Care Medicine and Interdisciplinary Pediatric Health Services Research and Epidemiology University of Arkansas for Medical Sciences and Arkansas Children's Hospital Little Rock, AR 72202-3591
REFERENCES
1. Munoz E, Soldano R, Laughlin A, Margolis I, Wise L. Mode of admission and cost: public hospitals face financial risk. Am J Public Health 1986;76:696-7. 2. Munoz E, Chalfin D, GoldsteinJ, Lackner R, Mulloy K, Wise L. Health care financing policy for hospitalized pediatric patients. Am J Dis Child 1989;143:312-5. 3. Munoz E, Lory M, Josephson J, Goldstein J, Brewster J, Wise L. Pediatric patients, DRG hospital payment, and comorbidities. J PEDIATR 1989;115:545-8. 4. Munoz E, Barrios E, Johnson H, Goldstein J, Mulloy K, Chalfin D, Wise L. Pediatric patients, race, and DRG prospective hospital payment. Am J Dis Child 1989;143~612-6. 5. Munoz E, Laughlin A, Regan DM, Teicher I, Margolis IB, Wise L. The financial effect of emergency room generated admissions under prospective payment systems. JAMA 1985; 254:1763-71. 6. Munoz E, Josephson J, Tenenbaum N, Goldstein J, Shears AM, Wise L. Diagnosis-related groups, costs, and outcome for patients in the intensive care unit. Heart Lung 1989;18:62733. 7. Flancbaum L, Dougherty C, Brotman DN, Avedian J, Trooskin SZ. DRGs and the "negative" trauma workup. Ann Emerg Med 1990;19:741-5. 8. Pollack MM, Cuerdon RC, Getson PR. Pediatric intensive care units: results of a national survey. Crit Care Med 1993; 21:607-14. 9. Fiser DH. Assessing the outcome of pediatric intensive care. J PEDIATR 1992;121:68-74. 10. Pollack MM, Getson PR. Pediatric critical care cost containment: combined actuarial and clinical program. Crit Care Med 1991;19:12-20. l 1. Rabkin MT, Wallace EC. Provider concerns and the implementation of health care reform. In: Brecher C, ed. Proceedings of the Conference on Implementation Issues and National Health Care Reform. Washington, D.C.: Josiah Macy Jr. Foundation, 1992:123. 12. ThorpeKE. Cost containment andnationalhealthcarereform: implementation issues. In: Brecher C, ed. Proceedings of the Conference on Implementation Issues and National Health Care Reform. Washington, D.C.: Josiah Macy Jr. Foundation, 1992: 78-9. 13. American Academy of Pediatrics Committee on Hospital Care. Guidelines and levels of care for pediatric intensive care units. Crit Care Med 1993;21:1077-86.
Prospective payment and pediatric intensive care Prospective payment systems are fixed-payment systems for hospital care and were conceived on the premise that hospital costs can be predicted for subsets of patients. These systems were designed to check the rising cost of health care by encouraging hospitals to operate efficiently. Until recently, most pediatricians and pediatric hospitals had been spared the prospective payment concerns that have plagued our adult medicine colleagues for the last decade. However, as more and more states in the United States adopt prospective payment systems, pediatricians must not fail to understand their impact on pediatric health care. The method of calculation of reimbursement in different prospective payment systems varies widely. However, in most systems, patients are assigned a diagnosis-related group classification based on their constellation of diagnoses and procedures. Age, sex, and comorbidities are also factors for a few DRGs. These groupings were derived to represent homogeneous subsets with respect to hospital length of stay as a proxy for hospital cost. Each DRG has an associated weight derived by dividing the average hospital cost per discharge (historically) to provide care for patients in that sPecific DRG by the average hospital cost per discharge for all cases across all DRGs. Reimbursement to hospitals for individual patients is calculated by multiplying the average cost per discharge across all cases in all DRGs as a base rate by the individual patient's DRG-associated weight. This reimbursement rate is then adjusted by using a number of other variable adjustment factors. These adjustments sometimes include an urban wage index factor based on local labor costs, a graduate medical education allowance for teaching hospitals, an adjustment based on the number of hospital beds, and an adjustment for outliers, short-stay cases, and transfers to other hospitals. Other modifications that have been used include adjustments to protect rural hospitals that must compete with urban hospitals for labor, hospitals that serve as sole community providers, hospitals that serve a disproportionate share of low income patients, and rural referral centers. Some states and systems have Reprint requests: Debra H. Fiser, MD, Arkansas Children's Hospital, 800 Marshall, Little Rock, AR 72202-3591. THE JOURNALOF PEDIATRICS1993;123:411-2. Copyright | 1993 by Mosby-Year Book, Inc. 0022-3476/93/$1.00 + .10 9/21/49587
also used adjustments for variable severity of illness, which may or may not be disease specific and may consider severity during all or only part of hospitalization. Some systems also allow for capital depreciation. Pon et al. report in this issue of THE JOURNAL that, under New York State all-payer prospective payment guidelines, pediatric tertiary intensive care services in their hospital resulted i n a loss of more than $400,000 per PICU bed per year. These dismal findings are not surprising in light of previous work demonstrating significant losses under DRG payment systems for teaching hospitals or public institutions, 1 hospitalized pediatric patients in general, 2 pediatric patients with more comorbidities,3 Medicaid patients, 2 black and Hispanic pediatric patients, 4 emergency admissions, 5 and adult intensive care unit 6 and trauma admissions. 7 Most PICUs are located in teaching hospitals, s Most PICU admissions are emergency admissions, and admissions for trauma are common. 9 Minorities are served disproportionately by PICUs, compared with predictions from population statistics, as are Medicaid patients. 9 In addition, most patients admitted to a PICU have one or more comorbid conditions. 9 See related article, p. 355.
I
DRG PICU
I
Diagnosis-related group Pediatric intensive care unit
Although, in theory, hospitals with an "average" case mix could offset PICU admissions with less severely ill patients to balance their "bottom line," tertiary pediatric teaching hospitals are unlikely to achieve this aim. In either case, this system creates serious financial disincentives to hospitals for the provision of pediatric intensive care services. As hospital administrators with shrinking operating margins are increasingly forced to watch the bottom line, the expected impact will be a reduction of services provided by smaller hospitals with a shift of these patients to tertiary care institutions. Increasing losses by tertiary care institutions will be expected to curtail significantly the ability of PICUs to provide state-of-the-art technology and to retain experienced personnel. Although some increased efficiency may be realized to blunt the fiscal impact, 1~ hospital adminis-
411
4 12
Fiser
trators will surely balk at upgrading and expanding services, regardless of need, in deference to more profitable ventures. 11 Critically ill children and their families will fall victim as unavailability of services produces less-than-optimal outcomes, with, ironicallyl even greater costs to society for rehabilitation and loss of productivity. Simply stated, Port et al. have demonstrated that costs exceed reimbursements for P I C U patients. However, it is important to ask whether reimbursements are too low or costs too high. Were the "industry standards" used by the authors to calculate cost realistic? Hospital costs are rising at two to three times the rate of inflationl2; how much increase is necessary to keep up with advances in technology? More important, how much does keeping up with technology improve outcome? We must also consider the intangible cost of failing to produce a good outcome. On the other side of the coin, are the DRGs inappropriately weighted to deal with this subset of critically ill children or are the adjustment factors for their hospital's reimbursement inadequate to recoup costs? Undoubtedly, each of these factors contributes to the problem. Few would disagree that something must be done to contain health care expenditures in the United States, but prospective payment, in its present form, may not be the best answer. The goal of health care reform is to create a health care system that is comprehensive, accessible, coordinated, continuous, and efficient. Efficiency implies producing the best outcome at the most affordable cost. For pediatric intensive care, regionalization, in combination with coordination of care by pediatric critical care medicine specialists, is the key to efficiency. An inequitable prospective payment system will undermine the goal of regionalization. A n y changes i n health care delivery aimed at cost containment must be examined with regard to impact on outcome. Additional funding is desperately needed for research on outcomes, treatment effectiveness, and technology assessment. Guidelines have already been developed for PICUs in the form of standards for facilities providing various levels of care.13 As a next step, outcomes research must be used to construct triage and referral guidelines detailing which Patients may appropriately be cared for in facilities of varying capability. Finally, an equitable payment system must evolve by using more specific severity indexes or comorbidities, or both, to match reimbursement more closely to the origin of the costs in tile intensive care unit, rather than assuming that the mix of all cases will provide adequate reimbursement. Without significant system modifications, many tertiary care pediatric institutions will be unable to survive in a prospective payment environment, much less continue to pro-
The Journal of Pediatrics September 1993
Vide leadership in provision of state-of-the-art health care and research.
Debra H. Fiser, MD Professor and Chief Pediatric Critical Care Medicine and Interdisciplinary Pediatric Health Services Research and Epidemiology University of Arkansas for Medical Sciences and Arkansas Children's Hospital Little Rock, AR 72202-3591
REFERENCES
1. Munoz E, Soldano R, Laughlin A, Margolis I, Wise L. Mode of admission and cost: public hospitals face financial risk. Am J Public Health 1986;76:696-7. 2. Munoz E, Chalfin D, GoldsteinJ, Lackner R, Mulloy K, Wise L. Health care financing policy for hospitalized pediatric patients. Am J Dis Child 1989;143:312-5. 3. Munoz E, Lory M, Josephson J, Goldstein J, Brewster J, Wise L. Pediatric patients, DRG hospital payment, and comorbidities. J PEDIATR 1989;115:545-8. 4. Munoz E, Barrios E, Johnson H, Goldstein J, Mulloy K, Chalfin D, Wise L. Pediatric patients, race, and DRG prospective hospital payment. Am J Dis Child 1989;143~612-6. 5. Munoz E, Laughlin A, Regan DM, Teicher I, Margolis IB, Wise L. The financial effect of emergency room generated admissions under prospective payment systems. JAMA 1985; 254:1763-71. 6. Munoz E, Josephson J, Tenenbaum N, Goldstein J, Shears AM, Wise L. Diagnosis-related groups, costs, and outcome for patients in the intensive care unit. Heart Lung 1989;18:62733. 7. Flancbaum L, Dougherty C, Brotman DN, Avedian J, Trooskin SZ. DRGs and the "negative" trauma workup. Ann Emerg Med 1990;19:741-5. 8. Pollack MM, Cuerdon RC, Getson PR. Pediatric intensive care units: results of a national survey. Crit Care Med 1993; 21:607-14. 9. Fiser DH. Assessing the outcome of pediatric intensive care. J PEDIATR 1992;121:68-74. 10. Pollack MM, Getson PR. Pediatric critical care cost containment: combined actuarial and clinical program. Crit Care Med 1991;19:12-20. l 1. Rabkin MT, Wallace EC. Provider concerns and the implementation of health care reform. In: Brecher C, ed. Proceedings of the Conference on Implementation Issues and National Health Care Reform. Washington, D.C.: Josiah Macy Jr. Foundation, 1992:123. 12. ThorpeKE. Cost containment andnationalhealthcarereform: implementation issues. In: Brecher C, ed. Proceedings of the Conference on Implementation Issues and National Health Care Reform. Washington, D.C.: Josiah Macy Jr. Foundation, 1992: 78-9. 13. American Academy of Pediatrics Committee on Hospital Care. Guidelines and levels of care for pediatric intensive care units. Crit Care Med 1993;21:1077-86.