Estimation of standardized hospital costs from Medicare claims that reflect resource requirements for care: impact for cohort studies linked to Medicare claims.
OBJECTIVE
To compare cost estimates for hospital stays calculated using diagnosis-related group (DRG) weights to actual Medicare payments.


METHODS
Medicare MedPAR files and DRG tables linked to participant data from the Study of Osteoporotic Fractures (SOF) from 1992 through 2010. Participants were women age 65 and older recruited in three metropolitan and one rural area of the United States.


METHODS
Costs were estimated using DRG payment weights for 1,397 hospital stays for 795 SOF participants for 1 year following a hip fracture. Medicare cost estimates included Medicare and secondary insurer payments, and copay and deductible amounts.


RESULTS
The mean (SD) of inpatient DRG-based cost estimates per person-year were $16,268 ($10,058) compared with $19,937 ($15,531) for MedPAR payments. The correlation between DRG-based estimates and MedPAR payments was 0.71, and 51 percent of hospital stays were in different quintiles when costs were calculated based on DRG weights compared with MedPAR payments.


CONCLUSIONS
DRG-based cost estimates of hospital stays differ significantly from Medicare payments, which are adjusted by Medicare for facility and local geographic characteristics. DRG-based cost estimates may be preferable for analyses when facility and local geographic variation could bias assessment of associations between patient characteristics and costs.
Park Nicollet Institute for Research and Education, Division of Health Policy and Management, University of Minnesota, Minneapolis, MN.
John T
JT
Schousboe
Misti L
ML
Paudel
Brent C
BC
Taylor
Lih-Wen
LW
Mau
Beth A
BA
Virnig
Kristine E
KE
Ensrud
Bryan E
BE
Dowd
D000368:Aged; D015331:Cohort Studies; D003953:Diagnosis-Related Groups / Q000191:economics*; D005260:Female; D006295:Health Resources / Q000191:economics*; D017721:Hospital Costs / Q000592:standards*; D006801:Humans; D007902:Length of Stay / Q000191:economics*; D006278:Medicare; D014481:United States
DRG weights; Hospital costs; Medicare claims; Medicare payment; cohort-claims linked studies