Drg System and Its Implication on Nurse Administrators Research Paper

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Diagnosis Related Groups (DRG) Systems

DRG Systems and its Implication on Nurse Administrators

Introduction to Diagnosis Related Group System

Implication for Nursing Practices

Quality of Healthcare System

Work Load of Nurses

Job Opportunities for Nurses

The paper is about Diagnosis Related Groups System which is introduced to simplify the payment procedure adopted by insurance companies. The system classifies the patient cases into certain categories to get an idea about cost of resources allocated on each of them. The system has its pros and cons, posing certain limitations to the nursing staff's performance. The paper reviews how the system was introduced, what are its current implications and the future perspective.

DRG Systems and its Implication on Nurse Administrators

The 21st century has given birth to the new regime of organizational management, focusing on easing the role of administrators and ensuring quality of service. The concepts of continuous improvement and total quality management are in fashion in every industry to devise the best possible functional layout for the stakeholders. As time advances, the concern of customer satisfaction has broadened its domain to ensure employees' satisfaction level as employees are the major drivers behind quality service provision.

In the perspective of service organization like hospitals, the quality of service depends upon the intangible factors which are difficult to measure at times. The developments in the field of research have paved ways for quantifying many aspects so that performance evaluation can be made easy. The development and improvement find their roots in the concept of change. The acceptance of change is the basic factor determining the level of success for any change. The same concept of change management is explained in the paper.

The paper casts light upon the hospital industry in the perspective of its administration. The Diagnosis Related Group (DRG) System is discussed in detail to explain its various aspects that can determine its success. The most important stakeholder discussed in the paper is nurses. The paper also links the DRG system with Kurt Levin Model of Change to give an idea about its efficacy. The most important section of the paper deals with the suggestions to enhance the effectiveness of DRG System for nurses so that best possible favorable outcomes can be obtained.

Introduction to Diagnosis Related Group System

As the name shows, Diagnosis Related Group System is the system of grouping of hospital cases providing related type of medical care to the various patients. In other words, it is the classification of hospitals cases on the basis on what type of patients they treat. Depending upon the similarity found in the diseases, their diagnosis and treatment patterns, the types and volume of resources consumed on patients are calculated. Similarities can also be found between ages, gender, complications in case, ICD diagnoses etc. This calculation determines the fee structure for patients.

The system is in practice in USA, Australia and many European countries including Austria, Germany, France, Finland, Ireland, Estonia, Sweden and Spain. In every country, the system is enforced in a different manner depending upon the healthcare requirements of their country and enforced legislation.

Literature Review

The basic goal behind development of Diagnosis Related Group System was to streamline the process of financial administration in the hospitals. It was necessary for the government to streamline health budget allocation process. There were certain other objectives like efficiency improvement and quality management in the hospitals (Healthcare Cost and Utilization Project, 2003). Increasing transparency was also an objective when the system was launched in Europe (European Observatory on Health Systems and Policies Series, 2011).

The cases treated in hospitals were categorized under 467 heads (Bull, 1988). There were 466 distinct heads and the last one consists of the cases which could not be covered in the previous 466 categories. In is interesting to mention that the 466 groups were not based on distinct diseases and cases. The relevant cases were placed in one category. The relevance was found on the basis of diagnostic measures in practice in hospitals. Based on the tests and medications offered at a certain hospital, and their frequency in a specified period, the funding was allocated to each hospital.

In addition to determining health expenditure by government, the health insurance companies like Medicare also facilitated themselves from the system. It gave them the ease of calculate a single payment package to be paid to the hospitals.

The development of DRG system followed the change theory presented by Kurt Lewin. Kurt Lewin Change Theory is based on the concept that there are certain practices embedded in the present system and they are accepted by all. Whenever, the practices are to be changed, a process has to be followed. The process consists of three steps; unfreezing, movement and refreezing. Unfreezing refers to the process of making people realize a need for change in their existing systems. In other words, the current practices are to be unfrozen. The established acceptance of present practices need to be made shaky so that people feel that the present system is incapable of delivering the required output. In this era of de-freezing, people mentally prepare themselves for a change.

Movement refers to the actual process of change. It is the phase when a change in injected into a system. It is the introduction phase of change and people get awareness about it. Many people resist it as well and place many queries. The change leaders need to address the concerns of everybody tactfully. The success of the new system depends upon how well it is accepted by the people. As queries are resolved and concerns are appreciated, people tend to accept the change.

The third process starts when everybody is well aware of the change and is ready to accept it as well. This is the time to enact change in the system in a manner that it is not eliminated. The change is made a permanent part of system and included in the standard operating procedures. De-freezing makes the change a part of the system which is in place and people start practicing it as an established practice.

This model was developed by Kurt Lewin and it is the simplest model of change.

In the context of diagnosis related system, it is interesting to mention that the implementing bodies followed the same change model. The hospital management was a tough job and allocating money resources to them was a burning question for insurance companies.

The old system prevailing in the hospitals was pay-for-service. The patients used to visit hospitals and pay for the services they got from the hospitals. The range of services included, consultancy, laboratory tests and medication. It was a tough job to maintain record of all the patients and the services rendered to them. The record was to be forwarded to the insurance companies for reimbursement as well. The insurance companies had to go through all the cases and check their insurance coverage.

The Diagnosis Related Group developed by insurance company, helped them to place the cases into defined categories and process them systematically. In order to get the group system accepted by the hospitals, certain benefits were offered to the hospitals. The benefits were in financial terms. Certain information systems were developed which were mandatory to run the DRG system effectively.

The major change introduced by DRG was the reimbursement made to the hospitals. Previously, insurance companies paid them back the ratio of the fee they charged from the patient. This system proposed that reimbursement will be based on the cost of resources occurred in handling a particular patient. A detailed homework was done to identify the set of resources to be utilized to deal with a patient of particular case. The same practice was conducted for all the cases and the cases which demanded similar resources were placed in one category. This is the reason that classification was not based on the disease merely, the factors like demographics of the patients were also considered to define categories.

As a matter of fact, prices are always higher than the cost and the difference leads to determine profitability for the organizations. It was more profitable an option for the hospitals to make deal with the insurance companies on the basis of prices charged from the customer. The change in reimbursement policy was not a favorable option. The hospitals might have received fewer amounts from the insurance companies if the calculations were made on cost of resources. It resulted in resistance for the new system and the change agents had to unfreeze the environment which was in the favor of fee based insurance reimbursement.

In order to motivate the hospitals to accept the new system, the privilege was introduced to reimburse the 75% of the hospitals own specific rate and the rest of 25% was on the basis of DRG. This privilege was offered to the hospitals for the first year after implementation. In the subsequent years, they had to pay the full fee. There was another special offer for the hospital that…[continue]

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