Diagnosis-Related Groups payment reform and hospital cost control

3.1 Advantages

The DRG payment method, settling medical expenses by disease type, exhibits clear advantages over the traditional ‘pay-per-item’ model [1]. Primarily, it significantly bolsters hospital cost control. The conventional ‘pay-by-project’ approach often leads to issues like misuse and wastage of surgical materials, medications, and other project-related expenses, resulting in uncontrollable medical costs [12]. In contrast, the DRG payment method hinges on disease diagnosis as its foundation. It considers diverse factors such as patient age, hospitalization duration, gender, clinical diagnosis, disease severity, and more to determine hospital compensation. This payment method necessitates hospitals to delve into more scientific and rational approaches for cost settlement and management, thereby enhancing their ability to control and manage medical expenses more effectively [13].

Moreover, DRG payment enhances hospital efficiency. Unlike the ‘pay-as-you-go’ model that focuses merely on service quantity and frequency while overlooking service quality, DRG payment integrates the medical service process and cost with the patient’s diagnosed disease [1]. Placing the patient at the center, this method incentivizes hospitals to provide high-quality, efficient medical services. This not only enhances medical outcomes but also conserves medical resources, enabling hospitals to attain more sustainable economic benefits [14].

Furthermore, the DRG payment method serves as a catalyst for elevating hospital quality management and fostering transparency in medical services. By categorizing and tallying medical services based on disease types, it enables more precise and effective hospital quality management. Through vigilant tracking and monitoring of DRG classification and costs, hospitals can promptly address and rectify issues in medical service quality, thereby enhancing the overall service standards [11]. Simultaneously, this payment model enhances transparency in hospital medical services, enabling patients and the public to better comprehend the hospital’s medical services and expenses. Ultimately, this fosters greater credibility and bolsters the hospital’s societal standing [15].

3.2 Limitations

While the DRG payment method presents clear advantages as a novel approach to hospital cost management, it also harbors certain limitations that impact cost control strategies.

Firstly, the inflexibility of the DRG payment method poses challenges in addressing specialized diseases. This method operates under the assumption of uniform treatment costs across all cases, disregarding instances where diseases necessitate specialized, high-cost treatments [16]. For example, rare diseases often require unique medical technologies and expensive medications, rendering the DRG payment method unable to accurately reflect the actual costs associated with these conditions. Consequently, this limitation affects the comprehensive cost management of hospitals [17].

Secondly, the DRG payment method influences hospitals’ treatment decisions. Payments under DRG are structured in groups based on cases, incentivizing hospitals to maximize economic benefits within predefined expenditure standards. In this mode, hospitals aim to reduce the length of hospital stays and enhance recovery rates to maintain diagnosis and treatment costs within a specific range [18]. Consequently, patients with conditions not meeting DRG standards may be unable to access necessary treatments, resulting in a reduction in overall treatment costs.

Additionally, the implementation of the DRG payment method imposes greater demands on hospital management. Its requirements call for extensive information infrastructure [19]. For smaller hospitals operating with limited resources, meeting these demands might prove challenging, thus limiting the effectiveness of their cost management strategies [6].

4.1 Full staff training

To effectively bolster cost management and accounting in public hospitals operating under the DRG payment method, comprehensive staff training within these institutions becomes imperative. This training aims to elevate awareness and comprehension of the DRG payment approach, emphasizing the significance of adept cost management and accounting within hospital operations [20].

Primarily, the training curriculum must encompass the fundamental principles underlying the DRG payment method. This involves organizing specialized lectures, seminars, and diverse educational formats to ensure medical staff possess a lucid grasp of the DRG system’s intricacies and recognize its pivotal role in hospital cost regulation [1].

Furthermore, the training regimen should concentrate on methodologies and proficiencies essential for effective cost management and accounting. Medical personnel must adeptly gather and accurately document cost-related data pertinent to the DRG payment method – such as expenses on medications, consumables, and bed occupancy – to ensure the precision and credibility of cost accounting [11]. Simultaneously, equipping medical staff with foundational principles and strategies for cost management becomes pivotal. This knowledge enables them to judiciously control expenditures and optimize resource allocation, ultimately enhancing the hospital’s efficiency and competitiveness [5].

Moreover, fostering inter-departmental collaboration and communication assumes paramount importance [4]. Within the framework of DRG payment, the collaborative prowess and communicative aptitude of medical personnel prove pivotal for effective cost management and accounting. Thus, the training program should emphasize bolstering team spirit, nurturing effective communication skills, and fostering a culture of collaboration among medical staff. This cultivates an environment conducive to proficiently executing cost management and accounting responsibilities [13].

4.2 Information management platform establishment

Establishing an information management platform within the framework of DRG payment and implementing standardized, unified coding for data stands as a critical pillar for public hospitals to effectively execute cost management strategies [7].

Primarily, hospitals need to achieve comprehensive cost data collection [11]. Constructing an information management platform tailored to DRG payment facilitates the integration of diverse datasets encompassing patient information, medical service expenses, pharmaceutical costs, consumables expenditures, and other pertinent data from systems such as medical information systems, human resource management systems, financial management systems, and medical record systems. This integration furnishes a specific foundation and data framework crucial for robust cost management practices [6].

Additionally, instituting standardized and universally coded data assumes paramount importance in developing the information management platform under the DRG payment model [10]. Harmonizing various hospital systems such as HIS, LIS, RIS, along with standardizing codes for medications, consumables, and diverse diagnostic and treatment procedures becomes essential. Adopting established coding standards like ICD-10 for disease diagnoses and ICD-9 for surgical operation codes ensures data uniformity. This unique coding system, facilitated through the information management platform, enables effective cost data collection. The assimilation and consolidation of this data empower hospitals to comprehensively oversee and manage costs, thus optimizing their financial strategies [18, 20, 21].

4.3 Disease type analysis and DRG group determination

Within the framework of the DRG payment model, conducting disease category analysis stands as a pivotal undertaking for public hospitals. By scrutinizing various diseases, we gain insight into their individual characteristics and allocate them to specific groups within the DRG, laying the foundation for hospital cost management and revenue accounting.

Pooling extensive case data and DRG enrollment criteria based on disease types facilitates a comprehensive understanding of the cost makeup within each disease group. Building upon this disease-specific analysis, optimization of the disease structure becomes essential [10]. Determining the categorization of diseases within the DRG allows hospitals to identify their advantageous disease categories, adjust their structure based on cost composition and management, and foster the growth of these advantageous categories. Simultaneously, enhancing the accuracy of DRG inclusion necessitates the establishment of a DRG inclusion inquiry system. This system accurately categorizes diagnoses and surgical procedures, scientifically predicting the actual pricing standards for diseases, consequently determining patient expenses during medical processes [6].

In the realm of cost management, heightened expenditures prompt hospitals to reassess their disciplinary construction approach and select treatment activities aligning with their functional positioning. This not only enhances the level of societal service but also tackles the issue of medical losses [22]. Through this approach, hospitals can effectively achieve precision and efficacy in controlling costs, ensuring both effective service levels and financial stability.

4.4 Clinician education and data accuracy

Under the DRG payment system, clinicians hold a pivotal position as their case data directly shapes hospital costing and payment outcomes. Hence, it’s imperative to heighten clinicians’ understanding of DRG principles and bolster accuracy in front-page case data [13, 21].

Primarily, clinicians must comprehend the operational guidelines of the DRG payment system, delineating DRG classifications within each department and correlating them with respective costs. Accurate completion of information on the first page of medical records significantly impacts DRG inclusion. Recognizing this, clinicians realize their pivotal role in shaping DRG data. Research [17] indicates that issues stemming from incomplete filling of the initial page of medical records result in cases being classified into high-frequency disease groups, low-frequency disease groups, or idiosyncratic disease groups. This classification discrepancy disrupts standard medical insurance payments and leads to avoidable economic losses [23].

Moreover, clinicians need to adhere to norms and requisites when documenting data on the initial case page. Precise recording of patients’ personal information, diagnoses, surgical procedures, medication usage, and other vital treatment details is imperative to avoid omissions or inaccuracies. This meticulous approach ensures that hospital cost calculations and payments accurately mirror the factual circumstances. To bolster clinicians’ comprehension of DRG and enhance accuracy in front-page case data, hospitals organize specialized training sessions. These courses enlighten clinicians about the background and significance of the DRG payment model and impart methods and techniques for accurately documenting initial case data [21].

Simultaneously, hospitals employ medical record quality control systems to oversee clinicians’ initial case page data. This system detects and rectifies errors or non-standard data entries promptly, elevating data accuracy and consistency. By integrating training initiatives and quality control measures, hospitals reinforce clinicians’ understanding of DRG and ensure precision in recording case data, aligning hospital practices with the requirements of the payment model [14].

4.5 Full cost accounting system establishment

Establishing a robust cost accounting methodology stands as a crucial component of effective cost management within the DRG payment system [1]. Ensuring the accuracy of cost accounting requires the unified collection and integration of departmental cost data, encompassing labor, materials, equipment maintenance, and other pertinent expenses. This consolidated data serves as the foundation for precise future cost calculations and analyses.

Furthermore, determining the elements and procedures for cost accounting involves analyzing disease types, optimizing their structure, and categorizing diseases within the DRG framework. Delving into disease analyses enables a comprehensive understanding of cost composition and variations among different illnesses. This analysis furnishes a scientific basis for cost accounting strategies. For instance, attributing costs to factors like personnel expenses, medications, consumables, asset depreciation, and other cost items aids in establishing standard costs for DRG groups and specific diseases. By comparing actual resource allocation and consumption against standard costs, discrepancies are identified, illuminating key control points and enhancing cost management practices [19].

Moreover, integrating DRG as the cornerstone of a comprehensive cost accounting system necessitates aligning with industry financial integration [19]. Employing financial cost analysis aids in refining medical diagnostic norms and standardizing diagnosis-treatment processes. This analytical method scrutinizes costs associated with diverse diagnostic and treatment procedures, identifying high-cost-low-benefit projects. Standardizing treatment plans and processes helps pinpoint inefficiencies, thereby curbing unnecessary expenses and fortifying cost control measures [14].

Top of Form

4.6 Integration of industry and finance

Firstly, financial cost analysis stands as a pivotal component in industry-finance integration. It involves dissecting various hospital costs, understanding their composition, and monitoring changing trends. This analysis aids hospital management in regularly evaluating cost-benefit ratios and devising corresponding adjustment strategies. Specifically, under the DRG payment method, financial cost analysis assumes heightened significance. It enables hospitals to discern the cost proportions associated with different diseases, facilitating targeted measures for precise cost management.

Secondly, medical diagnostic norms form the bedrock of clinical operations in hospitals and serve as the foundation for disease classification and grouping under DRG payment. Adherence to standardized medical diagnoses curtails unnecessary medical expenses and enhances the precision and consistency of disease classification. Hospitals must bolster clinician training to deepen their understanding of medical diagnostic norms, ensuring adherence to these standards in clinical practice. Simultaneously, hospitals ought to enhance their clinical pathway management, streamline the diagnosis and treatment protocols, and standardize the procedures for various examinations and treatments necessary for effective disease management. This approach aims to minimize disparities in hospitalization durations and the delivery of diagnosis and treatment services. By doing so, hospitals can optimize the allocation of medical resources in a rational and efficient manner, thereby achieving substantial cost savings [6, 16, 24].

Finally, standardizing the diagnosis and treatment processes proves an effective avenue for cost control. Clarity in these procedures and operational norms mitigates waste and unnecessary expenses [11]. Hospitals can initiate process improvement initiatives, introducing advanced management methodologies to optimize and reform diagnosis and treatment processes [7, 15]. Such enhancements elevate hospital work efficiency and service quality [25]. Additionally, leveraging information technology, such as hospital information systems and electronic medical records, facilitates the optimization of diagnosis and treatment processes [8, 10]. This reduces human-related errors, interventions, and missteps, thereby enhancing medical quality, safety, and overall efficiency [21, 23].