The impact of a pilot reform on the diagnosis-related-groups payment system in China: a difference-in-difference study

Abstract

BackgroundThe Chinese Government has announced plans to reform provider-payment methods at public hospitals by moving from fee-for-service to prospective and aggregated methods including diagnosis-related groups (DRG) to control health expenditures. In 2012, Beijing pioneered China's first DRG payment system in six hospitals. The aim of this study was to explore the effectiveness of Beijing's DRG pilot reform in reducing expenditures, out-of-pocket payments, and potential behaviors to circumvent payment control, including readmissions, selection, and cost-shifting. MethodsWe obtained discharge data from the Beijing Health Insurance Bureau for the period January, 2010, to September, 2012, from 14 tertiary general hospitals, which included six hospitals piloting DRGs within a portion of their payment system and eight control hospitals that implemented purely fee-for-service-based payment. Using a differences-in-differences design, we used hospital discharge data to assess the pilot's impact on cost containment. We did regression analyses to assess associations of DRG payment with outcome variables of health expenditures, length-of-stay, and out-of-pocket payment. The study was approved by Peking University Committee for Biomedical Researches. FindingsPost-reform, there were 36 780 cases using DRG payments and 50 322 cases in the control hospitals paid through fee-for-service. Our findings showed that DRG payment led to ¥1251 (6·2%) reductions in health expenditure and ¥647 (10·5%) reductions in out-of-pocket payment per admission. Length of stay or cost-shifting did not differ between DRG and non-DRG cases. Readmission rates were reduced (–1·4%) with DRG payment relative to non-DRG. About 19 814 (35%) potential DRG cases, however, were reverted back to fee-for-service-based payment. Hospitals processed the payment of older patients with more complications through fee-for-service payment, circumventing the effectiveness of payment reform. InterpretationFor China and other low-income and middle-income countries to fully implement prospective payment systems, such as DRG payments, without allowing circumvention seen in a partially implemented system, it might first be necessary to strengthen core monitoring and technological systems that would support feasibility of DRG payments. Continuous evidence-based monitoring and assessment, partnered with adequate management systems, are necessary to enable these countries to broadly implement DRGs and refine payment systems. FundingChina Medical Board (grant number CMB-OC-12-120).