The encyclopedia · Finance & Accounting · Financial decision · 2004–2017
Germany priced every hospital case by diagnosis group, and hospitals did more
A single diagnosis-related group priced every inpatient stay; hospital activity rose about 20% in the reform's wake.
German Federal Ministry of Health · German hospitals · health insurers
the move
German hospitals were paid through budgets tied to capacity and length of stay.
DRGs became the sole pricing, billing and reimbursement basis for inpatient care.
Each case is classified into a group with a set price, so revenue follows cases treated.
Hospitals gained a direct incentive to increase activity and manage each case's cost.
why it works
- One national price system makes hospital outputs comparable.
- Revenue follows cases, so the incentive is to treat more and faster.
- Hospitals keep the difference when they treat a case below its price.
- Length of stay and bed occupancy stop being the unit of payment.
what transfers
The price you use to reimburse determines what suppliers optimise: price the case, not the input, and they will compete on cases.
what came after
Research found DRGs significantly increased hospital activity by around 20%, with inpatient discharges rising from 16.6m in 2004 to 19.4m in 2017. The reform did not necessarily shorten average length of stay, and concerns about over-treatment emerged alongside the activity gains.
references
- Country-level effects of diagnosis-related groups: evidence from Germany's comprehensive reform of hospital payments
- Country-level effects of diagnosis-related groups: evidence from Germany's comprehensive reform of hospital payments
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