Cost weights to facilitate equitable reimbursement

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Cost Weights To facilitate equitable reimbursement, Australia has applied a system of cost weights. It appears that Germany is doing the same. To allocate a cost weight to each DRG a Benchmark is established. For example an appendix DRG may have an average cost of treatment of (say) $1,000.00. This might be chosen as the Benchmark and allocated a cost weight of 1.0000 (decimal places are important). Then in comparison to the cost of a heart transplant at say $40,000.00 the heart transplant will have a cost weight of 40.0000. If removal of a bunion costs $100.00 then the bunion has a cost weight of 0.1000.
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An Introduction to DRG's TC Health Administration © 5 To determine the amount of money that a Hospital is to receive for the DRG, the "Benchmark Price" is applied. The income for any single DRG is based on the formula of Benchmark Price x Cost weight. This simple explanation is meant only as an introduction. The process is actually more complicated as special algorithms are applied to take into account unusual circumstance. As may apply to nursing home type patients or for patients who present at one hospital for a temporary length of stay and are then transferred to a better equipped facility for comprehensive treatment - the insurers do not want to pay the full DRG income amount twice, Cost Weight Budget As a cost control mechanism, some Australian State Governments provide a cost weight budget to public hospitals to the effect that: head2right Hospitals have to pay the extra cost if they exceed their cost weight budget but can expect a higher cost weight budget in the next financial year; head2right If they perform less than their cost weight budget they have to reimburse any advanced prospective payment; head2right If they meet their cost weight budget and have money left over they keep the surplus. TC Health provide reports in their "Casemix Grouper" that enable Hospitals to compare actual accumulated cost weight experience to their allocated cost weight budget. An important monitoring device that allows Hospitals to plan cuts in elective surgery and other forms of optional work. DRG Values Table The cost weight and length of stay Table is commonly referred to as the DRG Values Table. Figure 1 - Sample DRG Values Table. Note: There is a column for Cost Weight (CW) and a column for Length of Stay (LOS). This Table is applied to income formulae - the algorithms that are used in calculating DRG reimbursement. The TC Health "Casemix Grouper' contains pre-constructed reports that monitor Hospital expense and actual LOS by DRG, in comparison to DRG fixed income and fixed LOS values.
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An Introduction to DRG's TC Health Administration © 6 Length of stay values Australia applies three length of stay values. There is an average length of stay, a low trim point (LTP) and a high trim point (HTP) refer Figure 1 The low trim point is one third of the average LOS. The low trim point is used to identify episodes where unusual circumstance applies or the DRG model doesn't fit.
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  • Fall '18
  • Diagnosis-related group, DRG

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