The end of an era? Activity-based funding based on diagnosis-related groups: A review of payment reforms in the inpatient sector in 10 high-income countries

Abstract

Context: Across the member countries of the Organisation for Economic Co-Operation and Development, policy makers are searching for new ways to pay hospitals for inpatient care to move from volume to value. This paper offers an overview of the latest reforms and their evidence to date.

Methods: We reviewed reforms to DRG payment systems in 10 high-income countries: Australia, Austria, Canada (Ontario), Denmark, France, Germany, Norway, Poland, the United Kingdom (England), and the United States.

Findings: We identified four reform trends among the observed countries, them being (1) reductions in the overall share of inpatient payments based on DRGs, (2) add-on payments for rural hospitals or their exclusion from the DRG system, (3) episode-based payments, which use one joint price to pay providers for all services delivered along a patient pathway, and (4) financial incentives to shift the delivery of care to less costly settings. Some countries have combined some or all of these measures with financial adjustments for quality of care. These reforms demonstrate a shift away from activity and efficiency towards a diversified set of targets, and mirror efforts to slow the rise in health expenditures while improving quality of care. Where evaluations are available, the evidence indicates mixed success in improving quality of care and reducing costs and expenditures.

Keywords: Diagnosis-related groups; Hospitals; OECD; Prospective payment system.