title: Risk adjustment policy options for casemix funding: international lessons in financing reform.
abstract: This paper explores modified hospital casemix payment formulae that would refine the diagnosis-related group (DRG) system in Victoria, Australia, which already makes adjustments for teaching, severity and demographics. We estimate alternative casemix funding methods using multiple regressions for individual hospital episodes from 2001 to 2003 on 70 high-deficit DRGs, focussing on teaching hospitals where the largest deficits have occurred. Our casemix variables are diagnosis- and procedure-based severity markers, counts of diagnoses and procedures, disease types, complexity, day outliers, emergency admission and "transfers in." The results are presented for four policy options that vary according to whether all of the dollars or only some are reallocated, whether all or some hospitals are used and whether the alternatives augment or replace existing payments. While our approach identifies variables that help explain patient cost variations, hospital-level simulations suggest that the approaches explored would only reduce teaching hospital underpayment by about 10%. The implications of various policy options are discussed.
authors.affiliation: Health Economics and Funding Reforms, 27 Monaro Road, Kooyong, Melbourne, VIC 3144, Australia. kantioch@yahoo.com.au
authors.forename: Kathryn M
authors.initials: KM
authors.lastname: Antioch
authors.forename: Randall P
authors.initials: RP
authors.lastname: Ellis
authors.forename: Steve
authors.initials: S
authors.lastname: Gillett
authors.forename: Daniel
authors.initials: D
authors.lastname: Borovnicar
authors.forename: Ric P
authors.initials: RP
authors.lastname: Marshall
mesh_terms: D003953:Diagnosis-Related Groups / Q000191:economics* / Q000706:statistics & numerical data; D017050:Episode of Care; D018166:Health Care Reform; D017721:Hospital Costs / Q000145:classification / Q000706:statistics & numerical data*; D006784:Hospitals, Teaching / Q000191:economics* / Q000706:statistics & numerical data*; D006801:Humans; D038622:Internationality; D017059:Models, Econometric; D010865:Pilot Projects; D011445:Prospective Payment System / Q000331:legislation & jurisprudence*; D020379:Risk Adjustment; D018570:Risk Assessment; D012720:Severity of Illness Index; D014739:Victoria