Diagnosis Related Groups
In the early 1980s, healthcare reimbursements to providers in the United States were predominantly fee-for-service. This incentivised resource overutilisation, leading to a sharp increase in healthcare spending (2). With the aim of creating a reimbursement model that would encourage earlier patient discharges and thereby reduce the uptake of services in the federal medical insurance programme Medicare, researchers at Yale University introduced the Diagnosis Related Groups (DRG) system in 1983. In this system, hospital stay reimbursements for each patient group were based on historical average costs and level of resource use during hospitalization (3). Over time, the DRG system led to a dramatic increase in the number of nursing homes in the United States, as hospitals were economically incentivised to discharge patients early rather than keeping them until they were fully treated. Medicare continues to struggle with this phenomenon even today (4).
While the DRG system in the United States was set up to impose provider accountability for patients during a hospital stay, it would come to serve quite a different purpose when introduced in Norway in the 1990s. The Norwegian health service was at that point a capitated system, and the use of DRGs represented a move towards activity-based funding, which was intended to stimulate productivity in hospitals, as well as improve efficiency and limit costs (2).
Results are generally less positive for medical care cycles than surgical care cycles
In 1997, the DRG system was introduced as a mandatory component of all Norwegian hospital financing (2). By then, more of the unintended effects of using DRG had come to light internationally, and it became apparent that the system could present an inherent risk to quality of care since it directly incentivizes hospitals to reduce the cost per stay, irrespective of outcomes. Additionally, the system did not provide enough incentives for providers to cooperate across units and service levels (5).
In the United States, these insights led to further experimentation both in the private and public sector, and single reimbursement models were introduced for longer care cycles across different service providers. A key developmental step was identifying one provider as being principally accountable for the cooperative effort and the payment, essentially making this provider contractually responsible for a care episode that could be extended to 30–90 days to include follow-up consultations and readmissions after discharge (Figure 1) (6). Finally, quality metrics were introduced to ensure that providers were maintaining quality of care while decreasing spending. These metrics are typically structural measures such as readmission rates, complication rates, or even mortality rates. Recent years have seen an increasing emphasis on measuring patient outcomes, such as patient-reported outcome measures (PROMs) (7).