Drg System and Its Implication on Nurse Administrators

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 in case a particular case needs high charges than the defined DRG rate, the insurer will consider the difference of payment. The outliers were not included in the general policy guidelines of the DRG.

This offer motivated the hospitals to accept the new system. In order to enforce the DRG system permanently in the healthcare facilities, legislation was passed which acted as the re-freezing measure.

The DRG system was designed without involvement of nursing staff. It was the product of few talented individuals who were serving at leading positions. They must have backed their designed system with many supporting facts and research, however, it lacked in consideration of many important facts and aspects. One of these factors is participation of nursing staff in its revival.

As DRG system is proposed for review in many countries of the world, it must be taken into consideration that the new system must be designed in such a manner that no stakeholder is left ignored. No entity is hurt from its implementation and it is accepted on grounds of its proven effectiveness and not imposed through legislation merely.

This suggestion is no exception as in the present world; the concept of participative management is emerging. The successful systems are the ones which are designed with participation of all stakeholders' regardless their position in the hierarchy. The level of importance attached to stakeholder must be based on its influence on the job role and not his level. The excellent results can be obtained if the closest point of contact with patient is strengthened. It is possible only through considering the concern of nursing staff and addressing them in the best possible manner.

Having discussed the background of DRG system, it deems fit to proceed to the section of its implications for nurses.

Implication for Nursing Practices

As mentioned earlier, DRG system was introduced to streamline the financial administration in hospitals and clinics. It is interesting to mention that the DRG system implementation required certain changes in the hospital systems. It is no exaggeration to mention that it was result of a series of changes to be made in the hospitals' administration procedures. These changes affected the work load of the staff and the quality of healthcare system.

Described below is the implication of DRG system for nurses.

Quality of Healthcare System

Quality of the healthcare system depends upon uncountable factors; the most important one of them is the time a patient has to spend at healthcare facility. The number of visits required can also be considered a quality determinant. It happens most commonly that the patients are invited to the hospitals multiple times, either to take medical history, collect specimen, collect reports, consult the physicians, get the medication make and follow-up visits. If the patient is not fit after passing through this process, it is evident that the healthcare services are not provided up to quality standards.

There are certain other factors which determine the quality of healthcare centers, as mentioned earlier as well. It includes behavior of the doctors, staff and nurses. The patients come into contact with nurses frequently during their treatment. It can be assumed that nurses stay in the closest contact with the patients. On the basis of the contact, certain responsibilities are assigned to them which are greater in number as compared to any other staff member at the hospital.

With the implementation of DRG, and particularly after its enforcement as legal requirement, the patients have to be included in one of the categorized defined in DRG. No doubt that there is a category that covers the case which does not fall in any categories, but all the cases cannot be included in that last category. The administrator needs to place the patient in a group which may be a time consuming process for him. Once a group is allocated to the patient, the set resources and patterns are attached with the patient. Consequently, he follows the procedure associated with that group. As a result, the medical practitioners and hospital administration lose control over the quality of healthcare services to be provided to the patient.

Each category in DRG system is assigned a code. Many of the codes are ambiguous and nursing staff does not understand them fully (Rosenberg and Brownie, 2002). The ambiguity may lead to placement of patient in a wrong group which can cause serious issues about provision of quality healthcare facilities.

Work Load of Nurses

In addition to performing the routine function of patient care, there are many support functions which are included in the job description of nurses. These support functions are related to administration which is greatly affected by DRG regulations. DRG regulations have increased the work load of nurses in administrative domain. These activities add no value to the hospital's administration except complying with DRG regulations. The end result is the nurses are not able to give proper time to the patients (Halloran, 1985).

Nurses are concerned about their performance appraisals which are to be determined on the basis of quality of healthcare provided to the patients. Nursing staff is subject to managing their routine functions in addition to the information system management that is particularly implemented because of DRG.

One of the drawbacks of DRG is its focus on cost management of hospitals ignoring the cost component of nursing staff. Nursing staff is high in number in hospitals as compared to any other staff; hence its consideration is mandatory when policies related to hospital management are devised. It must be considered that the cost management of nurses is done in a manner that enables them to perform their duties without any tension of bread and butter. As mentioned earlier, the behavior is nursing staff is one of the most important intangible factor determining the quality of services provided at healthcare facilities. If nursing staff is worried about meeting its both ends meet, it is quite possible that they cannot pay attention to their duties. Consequently, they can allocate wrong group to the patient. It is also possible that their pre-occupations hamper their ability to multitask which may result in worse conditions for patients. In either case, the hospital management calls for effective management of nursing staff. The satisfied and motivated staff can not only perform the functions effectively but can also play a vital role in highlighting the system deficiencies which act as bottlenecks on the way to achieve desired goals.