Medicare prospective payment without separate urban and rural rates

Health Care Financing Review, Winter, 1992 by Sheila M. O'Dougherty, Philip G. Cotterill, Steven Phillips, Elizabeth Richter, Nancy De Lew, Barbara Wynn, Thomas Ault

Two recent efforts to refine the DRG classification system use catastrophic complications and comorbidities (CCs) to better account for patient severity of illness and differences in resource requirements. The Yale refined DRGs were developed at Yale University under a HCFA-funded project (Yale University, 1989), and the New York grouper was developed for New York State by 3M/HIS. The Yale system divides DRGs based on the effect additional diagnoses and CCs have on expected resource requirements. Medical DRGS are divided into three refined DRGS (RDRGs): minor or no effect, moderate effect, and major effect. Surgical DRGS are divided into four RDRGs: minor or no effect, moderate effect, major effect, and catastrophic effect. The Yale revision expands the number of patient classes to 1,263 RDRGs.

After analyzing the Yale refined DRG system, the New York State Department of Health, in conjunction with 3M/HIS (Averill et al., 1993) concluded that the biggest improvement in case-mix measurement was accomplished with the addition of the catastrophic CCs. Based on this finding, New York developed a uniform list of major CCs that would apply across all DRGs. Further analysis showed that, within any MDC, patients with major CCs were similar. That is, the presence of the CC was a better indicator of the resources used than the principal diagnosis or the type of surgery performed. Therefore, New York created major CC categories by MDC. Most MDCs have at least two major CC DRGs - one for surgical cases and one for medical cases. The net effect is the addition of 54 new DRGs, for a total of 539.

Table 2 compares the predictive power of the HCFA grouper, the Yale refined DRGS, and the New York grouper in explaining costs. The mean coefficient of variation is also displayed, showing the degree of homogeneity of resource use within DRGs. The Yale refined DRGs and the New York grouper, which incorporate catastrophic complications and comorbidities, perform significantly better than the current HCFA grouper. These results are consistent with those of the HCFA-funded study at Queens University, which concluded that the Yale refined DRGs are as powerful as any of the other systems in predicting costs (Queens University, 1991).

                Table 2
Comparison of explanatory power of various
diagnosis-related group (DRG) classification
systems

                                            Coefficient of
Classification system       [R.sup.2]       variation  charges)

1991 HCFA grouper           .3022                93.37
New York grouper            .3320                86.13
Yale refined DRGs           .3466                82.47
NOTE: HCFA is Health Care Financing Administration.
SOURCE: HCFA, Bureau of Data Management and Strategy: Data
development by Bureau of Policy Development.

Finally, the stability of the relative weights across years for the three patient classification systems was examined by comparing the percentage of the DRG weights that changed by more than 5 percent between 1987 and 1988. Forty-eight percent of the Yale refined DRG weights changed by more than 5 percent, compared with 24 percent of the HCFA DRG weights and 23 percent of the New York DRG weights. Although this is an incomplete longitudinal analysis, it does appear that both New York and the current HCFA system are more stable than the Yale refined DRGs. One explanation is that the Yale refined DRGs have more than twice as many DRGs as either New York or the current HCFA system, resulting in smaller cell sizes and greater variability.