DRG-Style Prospective Payment Systems

This position paper of the Global Medical Technology Network is an internal statement of principles intended to offer participating associations a guideline for consistent non-binding, voluntary application at a national or regional level. As circumstances differ in each market, national associations should choose whether to use the GMTN principles as an appropriate reflection of local conditions. GMTN position papers only apply to the countries in which the subject policies, systems, or practices are in place.

DRG-Style Prospective Payment Systems

The global adoption of prospective payment systems such as the diagnosis-related group (DRG) payments raises key concerns for patient access to medical technologies. The principles below are intended to reflect the "best practices" in these types of prospective payment systems, and to ensure that patient and clinician access to innovative therapies and diagnostic tests is not disrupted.

Data Integrity and Transparency
DRG and other prospective payment systems (PPS) cannot measure the true case mix and costs of hospital care without robust, timely, and accurate data. Unfortunately, experience has shown that all hospitals struggle with data quality issues upon the introduction of new payment systems. This problem can disproportionately affect the payment levels for technology-intensive services.

• Healthcare systems that employ DRG and other PPS should ensure that payment rates are based on accurate and representative samples of hospital data that reflect the true costs of care. When data error is common across an entire healthcare system , other sampling methods or alternatives to establishing payment rates for technology-related services should be employed.

• To help guard against the use of erroneous data, full transparency should be ensured through the routine publication of the data upon which payment group rates are based - using appropriate safeguards for patient and provider confidentiality.

Acceptance of External Data
In some cases, correct payment rates cannot be established using existing data collected from hospitals. Inaccurate payment levels threaten patient access and penalize hospitals for providing clinically appropriate care.

• Valid, external data should be accepted and considered by health authorities in their construction of payment rates, where hospital data from within a PPS system is known to reflect significant error.

Rapid Coding and Payment Group Assignment
The availability of unique codes and assignments to PPS payment groups determine the time frames in which appropriate payment can be provided for new services. Rapid system updating, on at least an annual basis, is a critical element to ensure a current and clinically relevant PPS framework.

• The assignment of new codes to describe technology services should occur on at least a biannual basis and payment group updating should occur at least annually. New codes should be readily available for innovative therapies that bring significant new benefits or differences in patient care.

• Health ministries should also ensure that PPS payment groups are sufficiently homogenous, both in terms of clinical similarity and in terms of the costs of different treatment pathways.

Clear Financial Incentives for Efficiency
DRG and other PPS payment systems should serve patients and help drive efficiency by giving hospitals incentives to optimize patient outcomes. Restrictions such as volume limits on specific procedures, fixed annual budgets, and discounted payments for innovative therapies or lower-cost cases, all serve to undermine the efficiencies that DRGs were originally intended to promote.

• Health authorities should ensure that under PPS payment systems, hospitals retain clear incentives to treat patients with the most effective therapies available and to reduce patient lengths of stay when clinically appropriate.

Separate Payment for Innovative Technologies
Because DRG and other PPS can take several years to reflect the costs of new technologies, these systems may disadvantage patient access to important new therapies. To address this concern, an additional payment mechanism is necessary for innovative technologies that do not fit within existing PPS payment groups. For some payment groups, where material costs represent a large share of the total cost of care, it may be more appropriate, using open and transparent decision-making, to exempt technologies completely from the PPS payment, and provide separate payment.

• Technologies that represent a disproportionately large share of the available payment for applicable PPS payment groups should be exempted altogether from PPS payments, if there are concerns about adequate patient access.

• All PPS payment systems that rely on bundled, payment groups should provide additional, supplemental payment for new, innovative technologies for a two- to three-year period, during which time reliable data on the average cost of care using those technologies should be collected. After this period, a permanent DRG assignment can be made.

Outlier Payment
No healthcare system can adequately anticipate the costs of extremely intensive "outlier" cases, or afford the care required in these cases based on fixed PPS payments alone. Frequently, patients with long term, acute illness require significant investments, including technologies, on the part of administering hospitals.

• To account for extremely expensive cases, all DRG and other PPS systems should employ an "outlier" payment that is available to hospitals using a reasonable threshold to determine when the payment should occur.