A model for health


As health care systems come under increasing pressure to provide fair and equitable care to all patients, the need for a cost effective and quality system of health is even more imperative. HOOI YOU CHING examines the case-mix approach to health.

JUST as there is no such thing as a perfect tax system, there is also no such thing as a perfect healthcare system.  

Nevertheless, that doesn’t mean we can’t improve on existing methods to achieve a more equitable and efficient healthcare mechanism.  

Health Ministry deputy director-generalDatuk Dr Hj Ahmad Tajuddin Jaafar saysthat at present,the allocation ofresources in hospitals is based on thenumber of beds and past expenditurepatterns,which doesn't encouragehospitals or health care facilities tooperate in a more cost-efficient manner.

In the wake of escalating healthcare costs and a booming population, the need for a system to control increasing healthcare costs through better allocation of resources and proactive planning has never been more relevant.  

At a recent international conference entitled Improving National Healthcare System Through Case-Mix held at the Hospital Universiti Kebangsaan Malaysia (HUKM), experts in the field of case-mix management from Australia, US, Thailand, Japan, Singapore and Malaysia shared their experiences in implementing the case-mix system in their countries.  

The case-mix system is an information tool that provides an objective method for describing healthcare activities based on the type of patients treated, type of diseases treated and medical resources used in a hospital. 

The term case-mix is used to describe the mix and type of patients treated by a hospital. In other words, it is a hospital workload or throughput.  

One of the more widely used case-mix classification tool is the Diagnosis Related Grouping (DRG) system which was first developed in the US by Prof Robert Fetter and his team at Yale University in 1974. Later in 1983, the US federal government, under its national health insurance programme Medicare (which provides health benefits solely for elderly and disabled persons) introduced a fixed pricing system to reimburse hospitals based on a standard rate per DRG type.  

DRGs are used to classify inpatients receiving acute hospital care according to their principal diagnosis. From there, case-mix information is obtained by aggregating patients into meaningful cluster groups in terms of resource usage. That is, it assumes that patients with related diagnoses would require similar medical examinations and hence would incur similar treatment costs. Therefore, DRGs can serve as standards of measurement for hospital administrators and clinicians to justify the cost and resource allocation in the provision of care.  

Prof Dr Syed Mohamed Aljunid...'Case-mix improves efficiency as it reimburseshospitals based on complexities of cases,not just workload.'

In his keynote address Creating Greater Equity, Efficiency And Quality In Health Through Case-mix, Health Ministry deputy director-general Datuk Dr Hj Ahmad Tajuddin Jaafar says that the DRG system is becoming a popular provider payment mechanism since it presents data in a more objective way. This is because it takes into account the age of the patient, the severity of illness, average length of stay (ALOS), complexity of clinical cases, co-morbidities, quality of care, treatment costs and other treatment variables.  

At present, the allocation of resources in hospitals is based on the number of beds and past expenditure patterns, which doesn't encourage hospitals or healthcare facilities to operate in a more cost-efficient manner.  

“Hospital managers would want to know if the cost of treatment exceeds the allocation (or reimbursement). The government or stakeholders of a healthcare organisation would want to know why some hospitals (or departments within a hospital) are busier than others, yet require lesser budgets.  

“On the other hand hospital managers or clinicians may argue that their patients are more seriously ill, consists of cases with higher treatment difficulties or are older, and hence require more resources and specialist attention. 

“In order to determine the level of equity, efficiency and quality of a hospital, we must be able to identify the mix and type of patients treated by a hospital as well as the provision of medical resources. 

“In Malaysia, about 65% of the health ministry operating budget is allocated to curative care, of which nearly 77% is made out to hospitals.  

“Based on these statistics, it is crucial to assess the volume of clinical activities by studying the comparisons between and within hospitals in terms of its cost behaviour and resource management to ensure a more equitable health financing scheme.  

Dr James Vertrees explains that case-mixacts as an incentive-based fundingmechanism which helps to rationalisehealth care expenditures,maintainquality of care as well as minimisingadministrative burden.

“There are many alternatives of paying health care providers such as case payment, capitation, fee-for-service and others. Currently, the health ministry is exploring the feasibility of implementing a provider payment mechanism to hospitals based on the case-mix approach,” says Dr Ahmad Tajuddin. 

In Malaysia, work on the DRG based case-mix system was initiated in 1998, with the setting up of a case-mix research team comprising representatives from Universiti Malaya, Universiti Kebangsaan Malaysia, Universiti Sains Malaysia and the Ministry of Health.  

Four years later, Hospital Universiti Kebangsaan Malaysia (HUKM) became the first hospital in Malaysia to implement the case-mix system based on the Internationally Refined Diagnostic Group (IR-DRG).  

Since the case-mix system requires information from the medical records to be coded into a DRG software, which then assigns the principal diagnosis into various fields, accurate data input is vital for the system to work.  

“The experiences of other countries show that many patient data cannot be coded due to misplaced patient case notes, missing medical records, inadequate information. In Malaysia, we have embarked on the nationwide implementation of the international classification of diseases, tenth revision (ICD-10) since 1999. However, all the hospitals except for HUKM have yet to start with this practice.  

“Implementation of case-mix requires motivation and commitment. Hospital staff at various levels needs to be trained and involved at every stage of the planning. Also, the potential use of ICT must be explored to facilitate the smooth implementation of case-mix,” he says. 

Prof Emeritus George Palmer says thatAustralia has made considerable progressin implementing a number of aspects ofthe case-mix system in its health caresystem.

UKM head department of community health Prof Dr Syed Mohamed Aljunid says that although the case-mix system is new to Malaysia, it has been proven to be a better model compared to the European point-based payment system. 

“Case-mix improves efficiency as it reimburses hospitals based on complexities of cases, not just workload. Unlike in the European point-based system which is strictly a fee-for-service payment where patients are kept longer in wards or use more expensive drugs and investigations, a case-mix system provides no incentives for ‘over-provision’. 

“Some European countries and Japan which previously used the point-based system have replaced it with a prospective payment system based on case-mix in order to improve efficiency while maintaining quality,” says Dr Syed Aljunid. 

Dr Saperi Sulong of HUKM’s case-mix unit also highlighted some figures to back up the facts behind the hospital’s experience in implementing case-mix. 

“Based on a six month period from September 2002 to February 2003, there were 16,570 patients discharged from wards in HUKM. Data showed that the most common major diagnostic category (MDC) is MDC 14 (pregnancy, childbirth & the puerperium – 26.4%) followed by MDC 18 (Infectious & parasitic diseases, systemic or unspecific sites –10.4%) and MDC 05 (diseases & disorders of the circulatory system –7.5%).  

The most common diagnostic related groups (DRG) were DRG 14631 (vaginal delivery without complications – 12.5%) followed by DRG 18331 (viral illness without complications – 6.7%) and DRG 14731 (ante partum diagnoses without procedure and complications – 3.3%). 

“Data on the cases of level of severity did not however represent the actual burden of cases in HUKM because many higher severity level cases were left uncoded. Medical records may have been kept in the clinics or relevant departments for research purposes. Selection bias by the coder may have contributed to this misrepresentation as well,” says Dr Saperi.  

In 1988, Australia’s central government initiated a case-mix development project which received AUS$5mil per annum for the purpose of research and development.  

According to Prof Emeritus George Palmer from the Faculty of Medicine, University of New South Wales, in his paper AR-DRG: What other countries should know, Australia has made considerable progress in implementing a number of aspects of the case-mix system including the creation of an Australian version of DRGs called the Australian National (AN-DRG), the development of case-mix systems for other health services such as non-acute hospital care and ambulatory care, the establishment of a national centre for disease classification and the creation of a new classification of procedures. 

According to Dr Tomonori Hasegawa,Japan has come up with their own versionof diagnosis related grouping (DRG).

“DRGs are used in all states to describe the activities of each acute care public hospital and in planning the development of hospital services. AN-DRG was subsequently replaced by the Australian Refined-DRG (AR-DRG) that was slightly customised to each state. 

“Factors promoting case-mix development included a strong central government support for the use of case-mix and generous funding for its development as well as the early and extensive involvement of doctors and clinicians during the developmental stages. 

“The long standing routine collection of hospital discharge form containing data elements for DRG allocation proved invaluable. That information technology (IT) as a field and practice is highly developed in Australia meant that skills in data processing and the coding of diseases and procedures didn’t pose a major problem,” says Prof Palmer. 

In his paper Maximisation of Health Output in an Environment of Limited Resources: The Role of Case-Mix, Dr James Vertrees of 3M Health Information Systems explains that case-mix acts as an incentive-based funding mechanism which helps to rationalise health care expenditures, maintain quality of care as well as minimising administrative burden.  

“The case-mix concept is useful as it provides acute inpatients treatment of a given quality at a minimum cost. If providers are given the correct incentives, they will act in desirable ways. Incentives can move management from the central government to providers, which is much more effective than a command and control approach. 

“The role of DRGs in acute hospital care helps identify weaknesses in hospital departments and specific clinical areas. It also reveals those physicians whose practice patterns seem to differ from peers as well as to determine the process, final output and control charts of clinical pathways.  

“DRGs can assist in identifying areas where significant differences exist, areas where potential problems may exist and the assignable causes. 

“Another approach is the ‘sun and satellite’ framework for external efficiency. Here, case-mix is used to fund one or two hospitals in each region which, in turn, define and fund all other inpatient and related providers. This hospital will contract with other hospitals, as needed, to provide additional basic acute care, primary care, emergency care, extended care, and social care. 

“A case study done in Hungary and Portugal showed that hospital administrators were not held accountable for cost overruns. This was not unreasonable given that the administrators have little control over the facilities that they manage,” observes Dr Vertrees.  

In 2001, Japan launched a health sector reform that saw a case payment based on diagnosis procedure combination (DPC) replacing an outdated fee-for-service payment programme. A year later, a standard coding system for a computer-based medical recording was developed in about 200 hospitals. 

According to Dr Tomonori Hasegawa of Japan’s Toho University School of Medicine in his paper Healthcare provider payment mechanism in Japan, instead of using the ICD-9CM and ICD-10, they came up with their own version of a DRG called the DPC. 

“The DPC is a case-mix which is different from AP-DRG where each DPC has a disease code even when it is a surgical disease. For each DPC, a base payment is determined as a single national tariff. For each hospital, a coefficient is based on the number of referred patients, average length of stay, nursing staffs per bed and the average revenue per hospital-day in the previous year. To shorten the hospital stay, the base payment decreases with longer hospital stay,” says Dr Hasegawa. 

In his paper The Experience of Singapore in Implementing Case-mix: From Diagnosis, Coding to Costing, Dr Lee Chien Earn from Singapore’s Health Ministry says that case-mix should be planned and implemented in the context of a country.  

“Singapore has adopted the Australian AN-DRG case-mix classification system because we have found it to be a comprehensive and suitable model. 

“Prior to the case-mix system, output was defined in many ways and resulted in unfair distribution of medical resources. But standardisation through case-mix classification has allowed the ministry to do some benchmarking.  

“Data from case-mix identified practice variations across different hospitals. For example, Hospital C had an average length of stay (ALOS) of 26 days compared to hospital D which had an ALOS of 15 days. What we found was that hospital D had an active discharge planning programme. On the other hand, hospital C would leave to the last minute in performing medical tests on patients. This resulted in late hospital discharges with patients warded for longer periods and so incurred additional and unnecessary resources.  

“In the case of medical prescription, investigations revealed that hospital B had doubled the cost of hospital F because the former had a very bad prescribing guideline. For example, a health officer prescribed a third generation drug to patients even if it weren’t necessary. Based on this scenario, in the old system, the ministry would fund hospital B twice as much as hospital F for the same prescription bill. 

“Case-mix as a system needs to be flexible in keeping up with technological advances. We are developing to integrate our inpatient and outpatient database. We also looking at ways to track resource consumption across different settings through DRGs,” says Dr Lee. 

Another matter of contention arises from the case-mix incentive-based funding. Some fear that incentive for shorter hospital stay can compromise on the quality of care, what is termed “quicker and sicker” syndrome.  

So, is case-mix for Malaysia?  

While the jury is still out, past experiences from other countries in the use of case-mix show a promising future. As the healthcare system differs from one country to another, it is up to the national committee to emulate or eliminate systems that are suitable and relevant for application in both the public and private healthcare services. 

Basically, what is required is for the setting up of a national committee for case-mix to supervise the overall planning and to monitor its implementation. Hospitals should ensure that their health Management Information Systems is adequately installed, they have trained manpower as in trained coders, practise proper record keeping and is aware of the cost of maintaining those systems.  

Common fallacies about case-mix 

MYTH: It’s a way of cutting costs.  

Fact: No. It’s a tool to find cost problems  

Myth: It’s a way of interfering with clinical practice and medical autonomy.  

Fact: No. Clinicians’ input encouraged better outcomes using case-mix data. 

Myth: It’s a method of funding. 

Fact: No. It’s a tool to make funding models more sensible. 

Myth: It was invented by American economists. 

Fact: No. It was invented by clinicians. 

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