Measuring Clinical Effectiveness: METHODOLOGY
Mix Measurement
Comparing the effects of two drugs on patient-care costs and outcomes requires adjusting for differences in the clinical conditions of patients. The CEI started with the standard Diagnosis-Related Groups (DRGs), which are used nationally in the Medicare Prospective Payment System (PPS). Modifications were made to tailor these DRGs to the needs of the class of drugs being studied—anticoagulants in this study—and referred to as CEI-DRGs.
For example, two indications approved by the Food and Drug Administration (FDA) for the use of some LMWHs are hip replacement and knee replacement. The DRGs combined hip and knee replacements into the same set of DRGs (209 for unilateral replacements, 471 for bilateral replacements). To analyze them separately, the project team split these DRGs into sub-DRGs, one set for patients needing hip replacement (209.1 and 471.1) and one set for those needing knee replacement (209.2 and 471.2). All CEI-DRGs were created by adding a decimal digit to the Medicare DRG number.
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CEI-DRGs were also created to isolate certain patients with a secondary diagnosis of unstable angina from those in the same DRGs without unstable angina; for some DRGs with patients who had a secondary diagnosis of deep vein thrombosis (DVT); and for patients who received hip repair surgery for fractures. The CEI analyses presented here used Version 20 of the Medicare PPS DRGs.
Patient Cost Calculation
The CEI patient cost calculation was designed to derive patient-care costs for each patient discharged from a hospital. This method allowed cost comparisons between similar groups of patients receiving different drugs. The underlying CEI methods have long been employed by the health care industry to calculate costs consistently across hospitals using patient charge data.
The first step was to sum the charges by uniform billing revenue code for all patients who were discharged during the most recent fiscal year for which a Medicare cost report was available. The next step was to sum these by revenue center (hospital departments that charge patients) and to compare the totals with the inpatient charges by the corresponding revenue center reported on the Medicare cost report. suhagra
Because hospitals are not always consistent in their reporting of charges on patient bills versus the cost report, the charges reported on the two sources had to be aligned to make them consistent and therefore useful. Many hospitals too often ignore this step when using cost report data for patient costing.
Table 2 Example of Calculated Costs of Patient Care
|
Cost Center |
From Patient Bills Annual Charges | From Cost Report Annual Charges Annual Cost | Ratio of Cost to Charges |
Sample Charges |
Patient Cost | |
| Operating room |
$20,000,000 |
$24,000,000 |
$10,000,000 |
0.5000 |
$1,000 |
$500 |
| Recovery room | $4,000,000 |
$0 |
$2,000,000 |
0.5000 |
$200 |
$100 |
| Laboratory |
$20,000,000 |
$20,000,000 |
$8,000,000 |
0.4000 |
$500 |
$200 |
| Radiology |
$30,000,000 |
$30,000,000 |
$10,000,000 |
0.3333 |
$600 |
$200 |
|
$2,300 |
$1,000 |
|||||
The cost report also provided total costs for all hospital departments, not just the departments that bill patients. For example, the housekeeping and financial services departments do not bill patients, but they do provide services that are generally considered to be “overhead.” A process, called a stepdown, was used to allocate costs to the revenue centers. After the step-down was completed, the total cost for a hospital was not changed; however, all of the costs appeared in the revenue centers and none remained in the overhead departments.
Next, the financial analysts aligned the cost data in the same way as the charge data and calculated the ratios of total costs to total charges for each resulting revenue center. These ratios were then applied to the charge data for each patient to calculate costs by department for each patient. These departmental costs, which included all overhead costs, were summed for total cost analyses or were used individually for departmental cost analyses.
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Table 2 shows an example of this process for four revenue centers. The annual charges from the patients’ bills were $20 million for the operating room and $4 million for the recovery room. The charges reported on the cost report were $24 million for the operating room and $0 for the recovery room.
It is apparent that the hospital billed patients separately for the operating and recovery rooms but that it combined the data for these two departments on the cost reports. In this case, the costs and charges for these two departments would be added together; the resulting costs ($12 million) would be divided by the resulting charges ($24 million) to produce a ratio of cost to charges (RCC) of 0.5000. Thus, for every $1 in patient charges in the operating or recovery room, $0.50 would be allocated to that patient.
In this example, a patient incurred $1,000 in charges for use of the operating room and $200 for the recovery room, thus producing costs of $500 and $100, respectively, for these departments. The same analysis would be performed for all departments, and appropriate RCCs would be calculated. In this example, the RCC was 0.4000 for the laboratory and 0.3333 for the radiology department, with no alignment necessary.
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Although the departmental RCC approach is not as accurate as procedure-based cost accounting, it is far more precise than a single hospital-wide RCC approach, which is commonly used to estimate patient costs. The departmental approach can also be applied to all hospitals, even if they do not have a cost-accounting system. Using a consistent methodology for all hospitals allows CEI data to be pooled for more extensive research and analysis.
