Diagnosis Related Group ‘All Payor’ Hospital Payment and Medical Diseases: Financial Risk and Hospital Cost in Medical Noncomplicating Condition-Stratified Diagnosis Related Groups

There are many health policy issues related to diagnosis-related group (DRG) hospital payment. Previous work by our group had suggested that some DRGs did not adequately compensate for patients with multiple complications and comorbidities. Despite recommendations by federal advisory committees, the secretary of Health and Human Services has proposed no major changes to DRGs along these lines. We analyze resource consumption in any of the 88 non—complicating condition (CC)—stratified medical DRGs using the DRG prospective “all payor system” in effect at our hospital. Analysis of 12340 medical patients by payor (Medicare, Medicaid, Blue Cross, and commercial insurance) in these non—CC-stratified medical DRGs for a three-year period demonstrated that patients with more CCs per DRG for each payor generated higher total hospital costs, a longer hospital length of stay, a greater percentage of procedures per patient, higher financial risk under DRG payment, and a higher mortality, compared with patients in these same DRGs with fewer CCs. These findings suggest that new prospective DRG all payor systems may be inequitable to certain groups of patients or types of hospitals vis-à-vis the non—CC-stratified medical DRGs. Health policy leaders should be encouraged to stratify many medical DRGs by the numbers and types of CCs to more equitably reimburse hospitals under DRG all payor systems.