Diagnosis-related Groups (DRG) (Nursing)

00:00 Welcome back, everyone.

00:02 This school responsibility is an important aspect of organizational management.

00:07 Understanding reimbursement starts with learning about diagnosis-related groups.

00:13 A diagnosis-related group or a DRG is a patient classification system that standardizes prospective payments to a hospital and encourages cost containment initiatives.

00:23 Originally, hospitals would charge individually for each service and product used during a patient's length of stay.

00:31 As healthcare cost went up, the government sought a way to control cost while still encouraging hospitals to provide care more efficiently.

00:39 Starting in the 1980s, DRG has changed how Medicare pays hospitals.

00:44 Now Medicare pays a single amount for your hospitalization according to your DRG which is based on your age, gender, diagnosis and the surgical procedures involved.

00:55 Briefly, let's discuss how DRG payments are calculated.

00:59 Medicare starts by calculating the average cost of the resources necessary to treat Medicare patients in a particular DRG.

01:07 That base rate isn't adjusted based on a variety of factors including the wage index for that given area.

01:14 There may also be adjustments to the DRG based payment if the hospital treats a large number of uninsured patients or if it's a teaching hospital.

01:23 Now baseline DRG costs are recalculated annually and that information is released to hospitals, insurers, and other health providers through the Centers for Medicare and Medicaid Services.

01:34 Let's consider this example.

01:36 Mr. Jones and Mr. Smith were both admitted to the same hospital for treatment of pneumonia.

01:41 Mr. Jones was treated and released in three days.

01:44 Mr Smith's hospitalization lasted nine days.

01:47 Since Mr. Jones and Mr. Smith had the exact same diagnosis, they have the same DRG.

01:53 Based on that DRG, Medicare pays the hospital the same amount for Mr. Jones as it does for Mr. Smith, even though the hospital spent more money providing nine days of care to Mr. Smith than providing three days of care to Mr. Jones.

02:06 The DRG system of payment encourages hospitals to become more efficient in treating patients and takes away the incentive for hospitals to overtreat patients.

02:16 However, hospitals became eager to discharge patients as soon as possible and are sometimes accused of discharging patients home before they're healthy enough to go home safely.

02:26 To discourage early discharge, Medicare house rules in place that penalize a hospital if a patient is readmitted with the same diagnosis within 30 days.

02:36 In some DRGs, the hospital has to share part of the DRG payment with the rehab facility or the home healthcare provider if it discharges a patient to an inpatient rehab facility or to home health support.

02:48 DRGs are by far the most important cost control and quality improvement tool that governments and private payers have implemented.

02:55 So when thinking of everything that we've discussed today, I'd like for you to consider this question.

03:00 How does Medicare discourage early discharge? Medicare has rules in place that penalize a hospital if a patient is readmitted with the same diagnosis within 30 days.

03:17 I hope you enjoyed today's video on diagnosis-related groups.

03:20 Thanks so much for watching.