Rising healthcare costs: that old chestnut of most countries’ political debate, which gets its fair share of recurrent press coverage – this one among them – has seen legions of politicians and citizens alike moan over extortionate insurance premiums and increasing public spending on healthcare. Mostly it seems, to zero effect, at least in Switzerland, which boasts the somewhat unsavoury honour of having the second most expensive healthcare system in the world,
right after the USA. And things are about to change in the system.
While most of us still struggle to understand the TARMED system introduced a couple of years ago to reform ambulatory care financing, Switzerland is about to be injected with a new reform that was voted into existence some four years ago: DRGs (Diagnosis Related Groups) are a way of financing hospital care and it’s bound to work, or at least that is what everyone hopes.
DRGs were in fact invented in the 70s in the USA – one can only wonder here why so many countries still insist on implementing ideas that originate from the most expensive healthcare system in the world – where they went national in the 80s before, unsurprisingly, making their way to most European countries in the 90s, and finally, a good decade later, to Switzerland. So what does this acronym mean exactly? Developed in the 70s at Yale University to standardise hospital costs and clientele in an effort to control costs and quality, DRGs represented at the time an alternative, and allegedly a cheaper way of financing hospital care: instead of the traditional fee-forservice payment, DRGs are fees-per-case. It essentially means that medical cases are broken down by categories – based on diagnostics – and that each category has a pre-agreed cost attached to it. For a given medical case, the attached bills are thus known beforehand. To take into account the complexities and uncertainties of hospital cases, DRGs are structured around one main diagnostic with related costs attached, and secondary diagnostics that aim to take into account the possible complications and co-morbidities of each case. A patient case can thus be “upgraded” or “downgraded” to a more or less serious case level.
The whole point of DRGs is to define groups that are coherent from a medical but also financial point of view; a hip replacement case has a certain budget attached to it, based on prior agreements between involved parties, and is completed by subgroups that allow for possible complications (hip replacement with infection, for example). DRGs are thus part diagnostics (the diagnostic group), and part resource consumption (the costs attached to it).
Doctor cost
DRGs have for long become the mechanism of choice for reimbursement of care in the US and in Europe because they seek to reimburse providers fairly for their work while encouraging efficient delivery and discouraging the provision of unnecessary services. Health economics theory suggests that costs start spiralling once patients fully enter the care system (i.e., hospital or other care facilities) because providers start making decisions for them; hence a long-felt need in many countries is to try making providers aware of healthcare costs by setting prospective forms of payment, of which DRGs are the most used form. Many studies had shown the downsides of more traditional forms of financing mechanisms, with global budgets for hospitals leading to undertreatment and fees-for-service leading to over-treatment. These shortcomings have pushed countries to adopt DRGs in a hope to get a common “currency” of hospital production leading to more transparency, better performance, better budget allocation and better planning, by enabling comparisons between hospitals.
DRGs, however, naturally came with a price tag: on the administrative side, the break-down into multiple categories means a complex and very demanding coding system that essentially requires hospital administrators to morph into full-fledge managers; on the quality side, the pre-defined budget for any given diagnosis means a very real risk of patient selection to attract “best candidates” only, cost-shifting to other types of care facilities such as rehabilitation facilities and early discharge, since the payment for a particular case is the same whether the length of stay amounts to three or, say, 19 days.
The price of health
Indeed, as Philippe Cassegrain, DG of Geneva’s Clinique Générale-Beaulieu observes, right now in Switzerland “hospitals and other care facilities do not feel concerned about the final healthcare bill attached to a given patient since it does not really have an internal impact on the running of a hospital or a clinic.” It was a situation that was bound to be halted sooner or later by Switzerland’s powerful health insurers conglomerate and by cantons exasperated with having to pick up a large share of the healthcare bills. This seems only natural to Cassegrain, who seems upbeat about the future. “The DRG system will push us to better negotiate the costs with our providers,” he points out, adding with a tinge of doubt, “but it could prove detrimental to the patient and to the whole system if it really ends up meaning that you choose medical devices of a lesser quality – such as in the cases of prostheses – or courses of treatment less resource-intensive to make sure you fit into the pre-agreed cost envelope.”
Even if to the outsider, Switzerland might be hopping into the caboose of the DRG train, many practitioners, as well as clinic and hospital managers in the country have in fact been familiar with the DRG system for a long time, and have long been sensitive to the issue of resource management and cost containment.
Cassegrain notes that his clinic has been working for a very long time on its cost issues. “We started negotiating prices with our providers years ago to maintain an acceptable cost level and make sure our relationships with healthcare insurers remained a good one.” For the introduction of DRG will mark a shift of power away from care providers to health insurers, a move that might worry citizens who already pay very high premiums by international comparisons – some health insurers have already announced that the introduction of the DRG system will mean a slight premium increase to account for the “administrative costs” of the reform.
But for Cassegrain and many other hospital and clinic managers, this change was in the works for a long time. DRGs started to make their way into the country’s hospital system as of the mid-90s, in a few cantons such as Vaud and Valais. It is actually the globally positive assessment of the experience in those cantons that paved the way for a national introduction of DRGs. Reports show that these early DRG experiences have translated into a better work allocation for doctors, and higher competency level for practitioners, but also in a decline in the number of beds such as in Valais. If the experience is globally positive, all parties remain adamant that maintaining a high level of quality is the number one priority, and the Swiss Medical Association (FMH) warns that “a mercantile vision of health should not prevail over quality of care”.
Providers’ dilemmas
Cassegrain and most of those who have had experience with DRG until now note that this is not a miracle solution to fix long-standing healthcaresystem weaknesses. DRGs are merely a tool to help better financing and better planning, but as Cassegrain remarks, “it is no magic potion, and the high hopes set for it may only lead to disappointment.” Particularly if it is not applied the appropriate way.
For once, Switzerland’s slowness in implementing a tool that has been around for some 30 years might prove an advantage, as its shortcomings and downfalls, as well as ways to counteract them, have been fairly documented and studied in neighbour countries. Most of them have put in place incentives to guarantee the quality of care, ranging from deductions for not submitting quality data or if quality standards are not met, to supplementary payments for specific high-cost services such as chemotherapy and radiotherapy.
It is reassuring to see that SwissDRG, the organisation responsible for coming up with the new DRG coding, has already developed quality incentives that will be introduced along with the new system, such as reduction in reimbursement in case of abnormal length of stays, refusal of new payment in case of early readmission, and demands for regular quality reports. SwissDRG is also thinking about “how to integrate training costs into the coding,” an aspect that proved problematic already in European countries and that worries Philippe Cassegrain. “It is a shame that the DRG system yet does not take into account training costs,” he said, “it might lead to hospitals diminishing the resources allocated to training whereas it is a crucial aspect of care quality”.
Cassegrain also underlines that DRGs “do not take at all the prevention aspect of the healthcare system,” and that preventive care and treatment costs are not at all taken into account in the DRG calculation, a not very surprising feature given that historically DRGs focus on hospital care – and thus de facto on disease and emergency care rather than preventive care – but it could nonetheless prove counter-productive in the long run. The negotiating nature that has marked the DRG introduction in Switzerland, a somewhat typical aspect of the country’s political scene, will nevertheless give some wiggle room to the parties involved to voice their concerns, and thus improve the system as it evolves.
At present, negotiations are going on at full speed, as is the case each time the LAMal2 system is about to take a new turn. All parties involved have placed high hopes in DRGs cost-wise; DRGs are also eagerly anticipated for what they have to say about cantonal, regional and national hospital care needs and consumption, in a country where hospital planning ritually means very tense discussions, to say the least, between health insurers and cantons. It is therefore hardly surprising that DRG negotiations are taking place at the same time as hospital-planning discussions between cantons and health insurers. Each canton is about to come up with a list of agreed care facilities that will treat patients under the same financial conditions as public hospitals to make sure cantonal care needs are met, meaning, as of January 2012, that private clinics that would have agreed to being on the list will have to factor in DRGs – this only concerns compulsory insurance. If some clinics have already made clear that they are not interested, for those already used to working on their costs, such as Beaulieu, it will be a natural, almost easy, process. One can only hope that it also remains a painless one for the one party that will not be seated at the negotiating table, the patient.
The DRG experience
The payment for a particular case is the same whether the length of stay amounts to three or, say, 19 days. This aspect was the one most fretted about when DRGs were first introduced in Europe, as it leads to potentially more complications down the line and thus runs the very concrete risk of lowering quality of care. Did any of these fears materialise in Europe? As the Internal Health Economics Association puts it, “experience with various European models over the years has shown that DRG systems present their own unique challenges. Which methods best capture the true costs of treatment? What level of reimbursement is necessary to guarantee highquality care while keeping costs in line? And which incentives can be built into the system to promote efficient care? These and similar questions have been the subject of ongoing debate among physicians, researchers, health insurers, and the general public”. Globally speaking, most European countries have witnessed a decrease in their hospital lengths of stay following the DRG introduction, but often also better cooperation between hospitals, leading, as in Germany, to mergers and better planning, and thus, arguably, to better and more efficient care, an aspect that Switzerland hopes to emulate when it launches its very own DRG system in January 2012.
Article by Lauriane Zonco
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