What's needed for DRG's in South Africa's NHI?
A critical theme in South Africa’s National Health Insurance initiative is changing the way that hospital services are financed. Switching to Diagnosis Related Groups (DRG) was part of the original Green Paper in 2011, and remains firmly in place in the updated version released in December 2015. It’s not a simple switch, and needs several building blocks to work effectively.
It’s also a proven financing methodology. Many countries use DRGs, and have developed their bespoke versions. Originally designed as a quality assurance tool in the USA, DRGs were used by the Medicare Program to reimburse hospitals using prospective prices from 1983. It had 470 DRGs across 23 Major Diagnostic Categories (MDC), each of which can include both surgical and medical services. As combinations of WHO’s International Classification of Diseases (ICD), currently ICD-10, they initially didn’t reflect the severity or complexity of the conditions, and adjustments for these came later. There are now over 750 DRGs in use for 26 MDCs, depending on the version and country. Some DRG prices distinguish day case from inpatients.
About half the DRGs are medical, 47% for surgery in MDCs, plus 2% for pre-surgery and 1% for surgical cases not in MDCs and two DRGs for an invalid principal diagnosis and ungroupable workload. About 3% of DRGs aren’t in an MDC. It’s roughly a 50:50 split between medical and surgical cases.
Prospective DRG prices are seen as a way to control healthcare costs. It requires hospitals to manage their unit costs and annual expenditure within these. So why’s it not that simple? DRGs don’t extend across all hospital activity and need time to catch up with new medical techniques. These can either have their own reimbursement rates, or take so long to set that they can be a brake on investment, a claim for a slow take up of telemedicine. A recent example’s the proposal in 2015 from the American Association of Hip and Knee Surgeons (AAHKS) to the Centers for Medicare & Medicaid Services (CMS) to modify or establish a new MS-DRG for total hip arthroplasty (THA) cases involving patients with hip fracture. For 2016, CMS has released DRG version 33, one a year since 1983, including eight changes to existing Medicare Severity (MS) DRGs.
Since 1983, DRGs have almost gone global. As a proven reimbursement method, many countries have refined them to match their health systems. The UK and Ireland have Healthcare Related Groups (HRG). The Nordic countries have their NordDRG. These reflect health systems’ bespoke characteristics. This includes their different healthcare models and their specific cost structures.
Setting prices for DRGs often starts with existing unit costs. This needs a costing system with two main methodologies. One’s Total Absorption Costing (TAC) to allocate and apportion expenditure to unit costs. The others a variable and semi-variable costing methodology to identify expenditure changes arising from changes in workloads. Semi-variable costs are the most challenging to compile. Both methodologies rely on sound workload data and ICD 10 coding.
Using TAC throws up a specific challenge for healthcare. Direct costs that can be allocated to specific patients are a small proportion of total costs, maybe less than 10%. This creates the risk of large skewed unit costs derived mainly from using formulae for apportionments. One way to minimise these inconsistencies it to create cost pools for the MDCs or specialties where direct costs can be increased significantly. Each MDC can have its own apportionments on to workloads. This minimises skewed results, but doesn’t avoid them, so comparisons between hospitals’ will still reveal some odd numbers.
For South Africa’s switch to DRGs, some important activities are needed that apply lessons learned from other health systems. They include:
- Test the accuracy and completeness of hospital’s workload data, including duplication challenges as reported in eHNA, and minimising the workload assigned to DRGs for invalid principal diagnoses as discharge diagnoses and ungroupable workload
- Test hospitals’ ICD-10 readiness to avoid the USA’s unhappy experiences reported in eHNA
- Design the DRG grouper needed for reimbursement, including DRG choices for patients with more than one DRG for their hospital stay
- Set up reimbursement models for hospital services that don’t fit the DRG model
- Design and trial a national hospital costing methodology that reconciles workloads x unit costs to total expenditure
- Refine the costing methodology
- Run a parallel DRG financing model alongside the existing model to identify large swings
- Design an interim DRG financing model to minimise financial risks
- Estimate and monitor changes to hospital costs and the impact on total health service spending and finance.
With the NHI’s fourteen-year development timescale, now’s the time to start these. An early start provides time to iron out data idiosyncrasies and will help to minimise risks, which are always prevalent when financing models change. eHNA’s looking forward to reviewing these soon.
- 1,352 views
- January 20, 2016
- Sean Broomhead
South Africa's White Paper moves NHI on
It was 2012 when South Africa’s Green Paper National Health Insurance in South Africa set out plans for a National Health Insurance (NHI). Experiences and piloting since then is culminated in a White Paper, National Health Insurance for South Africa Towards Universal Health Coverage White Paper. Released in December 2015, it refined some of the approach. The 14 year timescale is retained. The information requirements are now much more developed and extensive.
The NHI Fund will contribute to an integrated and enhanced National Health Information Repository and Data System. It’s crucial for implementing and managing NHI and service portability of services. The NHI Fund’s information system will be based on an electronic platform, with links between the NHI Fund membership database and the accredited and contracted healthcare providers. It’ll support:
- Monitoring the extension of coverage in population sectors
- Tracking health status of the population and production of disease profile data used in computing capitation allocations
- All the financial and management functions
- Utilisation of healthcare benefits by the NHI members and using the information for planning and decision making for contracting, purchasing and communication strategies
- Quality assurance programmes for healthcare providers
- Production of reports for health facilities and health system management
- Research and documentation to support changes as the population’s healthcare needs change.
The NHI Green Paper identified the need for a Health Patient Registration System (HPRS) to enable for planning and providing health services, and tracking their use. The patient registration system will provide essential information on demographic and epidemiological data which is important for determining the services needed and refining reimbursement mechanisms.
The National eHealth Strategy for South Africa outlines a roadmap for achieving a well-functioning, patient-centred electronic NHIS. The strategy recommends an integrated national patient-based information system based on:
- Agreed scientific interoperability standards
- Improving clinical care efficiency
- Producing management indicators
- Facilitating patient mobility.
Realising the NHIS architecture, or eHealth enterprise architecture proposed in the eHealth Strategy, is an iterative process as part of establishing key building blocks and technical components. It’ll facilitate integration with other health sector information systems in the health sector, a critical NHI enabler.
The HPRS is an NHI component, and started its development in July 2013 as a partnership of the National Department of Health, the Department of Science and Technology and the Council for Scientific and Industrial Research (CSIR). It includes a Patient Registry and Master Patient Index (MPI) using South African’s Identification Number and all other legal identification numbers such as passports, as the primary patient identifier.
HPRS will track people using services at health facilities at different levels of care using capabilities of:
- Barcode Scanning of ID Books, driver’s licenses and biometric readers
- Patient lookup for demographic details, facility links and patient file numbers
- Generate a patient file number
- Maintain patient details
- Links patients to primary healthcare facilities
- Record visits by date, time, facility and purpose
- Provide management information about health service provision.
Phase 1 has focused on primary healthcare facilities in pilot districts. More than 555,000 patients were registered in 118 facilities. It’ll be operational all 698 facilities in the NHI pilot districts by 31 March 2016. Phase 2 will implement HPRS in PHC health facilities in all 52 districts and the 400 hospitals in the public sector.
HPRS Phase 1 includes geo-spatially plotting 12,808 GPs, 3,085 dental practitioners and 15,717 allied healthcare professionals currently practising in South Africa. It’ll be part of a web-based Health Provider Registration System for provider registration. Phase 2 create a Health Provider Index with links to the MPI through Health Information Exchange (HIE) middleware.
An NHI Risk Engine’s planned to mitigate fraud and corruption. It’s important partly because there may be weak internal control systems. It’ll be part of policies, procedures and systems that aim to curb aberrant practices. Alongside these, strategies will be developed to prevent abuse of health service facilities.
Cyber-security isn’t mentioned as a risk. Experiences from the USA show that healthcare’s at increasing risk, especially to acquire personal social security details for fraudulent claims. NHI data can have an equivalent appeal to cyber-criminals.
More health technology’s planned for South Africa. The White Paper sees health technology assessment as informing, prioritising, selecting, distributing, managing and introducing interventions for health promotion, disease prevention, diagnosis, treatment and rehabilitation. Efficient use of resources is a crucial to achieve a sustainable health system.
Increased investment is envisaged. eHealth leaders will need a methodology to demonstrate value for money and affordability. These are core components of business cases that eHealth leaders and teams need to master.
- 690 views
- December 21, 2015
- Sean Broomhead
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