Hospital financing reform and case-mix measurement: an international review

Health Care Financing Review, Summer, 1992 by Miriam M. Wiley

The payment of hospital services also differs between the public and private hospitals. Most private hospitals are paid on a per diem basis for inpatient care. However, the per diem based approach for the payment of services in public hospitals was replaced by the use of prospective global budgets in 1984-85. This reform arose from a recognition of the inflationary potential of the per diem based approach in the public sector and the potential which a budgeting approach offered for greater control over hospital costs.

To date, the determination of global budgets has been based on historic expenditure levels, with any rate of increase centrally determined and applied across all hospitals. Budgets are intended to cover operating costs and include depreciation and interest on capital. Because hospitals treat patients covered by a number of different insurers, the budget share required of each insurer is determined on the basis of the number of bed days used by the insurer's catchment area (Organization for Economic Cooperation and Development, to be published [a]).

With the introduction of budgets for public hospitals in the mid- 1980s, it was government policy to move towards the application of a standardized measure of workload as part of the budgeting process. Advancement towards the achievement of this objective has had to await the enactment of a more recent reform in 1991 which indicated that the process of determining the hospital budget should, in the future, incorporate a discussion of medical activity (Republique Francaise, 1991). The form that this review of medical activity should take is not specified and will, presumably, be a matter for agreement between the budget negotiators.

In 1991, the French Ministry of Health also produced an updated version of the case-mix system called Groupes Homogenes de Malades (GHM). GHM is essentially based on the HCFA DRGs, with some local modifications and an integrated mapping facility from local codes to ICD-9-CM. GHM was one of a number of developments to emerge from the Programme for Medicalisation of Information Systems, which got under way around 1982, and was among the first European initiatives to investigate case-mix measurement and costing within the acute hospital sector. In addition to case-mix measurement, this project was also involved in the development of a standardized system for collecting and coding activity data in acute hospitals.

It is against this background that commentators have noted that "The availability of data on medical information and the utilisation of resources have stimulated the progress of utilisation review" (Boulay, 1988). A further update of GHM to incorporate a more recent version of the DRGs is currently under active consideration.

Current indications are that the process of reform of the acute hospital sector in France towards the achievement of the objective of greater efficiency and improved performance has not yet been completed. As the debate on the relative merits of different options continues, it is likely that the process of a series of modest reforms, rather than major modification, will be continued.