Term Paper: Health Economics Prepayment Healthcare System &amp Drgs

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Health Economics

Prepayment Healthcare System & DRGs

The relationship that exists inextricably between the length of the patient stay in the hospital or other medical institution and the type of insurance held by the individual patient cannot be denied and has been in fact shown to be fact. In the examination of whether specialty and system of care exert independent affects on resource utilization the cross-sectional analysis of just over 20,000 patients who visited providers' offices during 9-day period in 1986. The study concluded that variations in patients mix should be a major determinant of variations in resource use..." The change, according to the work of Sajay (2005) is from "medical economics to health economics" and this was "announced by Klarman" who stated that "the economics of health is a new term than medical economics which reflected the recognition of economics as a toolbox for analyzing problems" In fact, it was Klarman who applied the definition of health economics as "medical care subjected to the constraint of scarce resources." (Sajay, 2005)

Health Economics

Prepayment Healthcare System & DRGs

Objective

This work will focus on a type of prepayment system for healthcare and its effect on the costs and quality of healthcare. The topic is the effect of diagnostic-related groups (DRGs) on the cost of quality of health care.

Introduction

In the work entitled "Health Care Criteria for Performance Excellence" (2005) it is that "an example of a strategic objective for a health system in an area with an active business alliance focusing on costs and quality of health care might be to become the low cost provider. Action plans likely would entail design of efficient processes to minimize length of hospital stays, analysis of resource and asset use, and analysis of the most commonly encountered Diagnosis Related Groups (DRGs) with a focus on preventative health in those areas. Performance requirements might include staff training in setting priorities based upon costs and benefits.

Length of Inpatient Stays Found Influenced by Insurance Type

It is stated that: "Organizational-level analysis and review likely would emphasize process efficiency, cost per member, and health care quality." Further stated is that the relationship between the length of inpatient stays and the type of health insurance of the patient which consisted to discharges in seven DRGs from Minneapolis and St. Paul during 1982. After applying controls for the age, sex, medical condition, severity of illness and hospital size, teaching and ownership status, and average annual occupancy rate, the null hypothesis that the type of health plan is unrelated to the length of stay of patients was found to be one that was rejected. Stated is that:

"Patients in prepaid group practices and independent practice associations exhibit significantly shorter lengths of stay than similar patients in Blue Cross and commercial health insurance plans, while Medicare and Medicaid patients exhibit significantly longer lengths of stay than those of similar commercially insured patients."

In the examination of whether specialty and system of care exert independent effects on resource utilization the cross-sectional analysis of just over 20,000 patients who visited providers' offices during 9-day period in 1986. The study concluded that variations in patients mix should be a major determinant of variations in resource use..."

Business Management vs. Medical Profession

The work entitled "Monetized Medicine: from the Physical to the Fiscal"..." is a study of the inner workings of the conflict that exists between the medical profession and business experts which is inclusive of accountants and from the sociological viewpoint. Stated is that the passage of the U.S. federal law in 1983 mandated DRGs as the 'basis of prospective payments to Medicare providers, DRGs changed from being industrial products to commodities." It is well-known that the considerations of medical issues do not adhere to the economic consideration and that the "transformation of professional practice in to market activity has not been readily accepted by physicians who consider it a threat to the professional autonomy."

Clustering of Patients in Industrialized Healthcare

The medical profession is set against the initiatives to industrialize the medical profession while business managers have their sights set on the transformation of healthcare into that of a "rationalized industry" that has been thoroughly researched throughout and not piece by piece (Kleinke, 1997) The engineer's creation for the hospital-factory were the Diagnostic Related Groups (DRGs). A DRG is stated to be "a statistical classification of patients filtered through two constraints: homogenous resource use and clinical coherence (Averill, 1991, p. 31 Clustering patients into groups with a common "resource consumption profile" groups the multiplicity of individual patients into the limited number of products necessary for product management." (Sajay, 2005)

The DRGs were an attempt by the medical professionals in an effort of standardization of medical practice. DRGs would allow the hospital to operate on a productive basis and yet the DRGs were not a commodity that could be traded and was not a product that could be stickered with a price tag. The result was the clustering of patients into groupings in order to utilize the hospital's resources more effectively and efficiently. The presumption of industrial engineers did not take into consideration that patients were consumers and had choices they could make between and among the products, services, and healthcare. The intention of the DRGs was not for a market that was administered in healthcare or for the purpose of price competition buildup between different providers of healthcare. However the understanding is that DRGs are a mechanism for fostering competitive forces in a quasi-market for healthcare.

The intended change in terms of the use of the DRGs was stated to be an "unforeseen consequence of the engineers' efforts. Fetter notes that a "common misconception of the DRGs were in the capacity of a payment mechanism usage for the reimbursement of hospitals.

Financial Schemes and Endeavors

The work of Sajay (2005) states that:

"Within health economics, the disavowal of medical care as a necessarily non-market phenomenon was elaborated along two lines since the early 1970s. First economists fashioned schemes of cost-sharing based on the notion that the patient as consumer did not "need" medical care but "demanded" it. Second economists devised theoretical arguments supporting competitive health plans by assuming hospitals and physicians as self-interested suppliers of care. (Melhado, 1998 as cited by Sajay, 2005)

Further stated is that:

The conceptual shift from doctor-patient to producer-consumer led to a few new "concrete policy initiatives" (Helhado, 1988, p. 16 as cited by Sajay, 2005)

From Medical Economics to Health Economics

The change, according to the work of Sajay (2005) is from "medical economics to health economics" and this was "announced by Klarman" who stated that "the economics of health is a new term than medical economics which reflected the recognition of economics as a toolbox for analyzing problems" In fact, it was Klarman who applied the definition of health economics as "medical care subjected to the constraint of scarce resources." (Sajay, 2005)

Through the DRG integration into the realm of cost of production medical staff could be held liable on terms of finance for their professional work. It is important to note that the medical profession in relation to the jurisdiction over health and sickness was not an area that the engineers or accountants and administrators challenged. Abbott (1998) states that it is through the claim of jurisdiction in relation to tasks that professions practice competition.

Discussion

The literature reviewed reveals the conflict that simmers just under the surface of the interaction between the business, management and financial realm within the institution affected by the DRGs and the professional medical staff. The viewpoint of professional medical staff is focused toward the outcome of the patient in terms of satisfactory discharge conditions. The inherent judgment of the medical professional and the business, management or finance professional is differentiated by the environment in which they operate… [END OF PREVIEW]

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Health Economics Prepayment Healthcare System &amp Drgs.  (2005, June 28).  Retrieved July 21, 2019, from https://www.essaytown.com/subjects/paper/health-economics-prepayment-healthcare/795839

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"Health Economics Prepayment Healthcare System &amp Drgs."  Essaytown.com.  June 28, 2005.  Accessed July 21, 2019.
https://www.essaytown.com/subjects/paper/health-economics-prepayment-healthcare/795839.