Stanley Feld M.D.,MACE
A bizarre circumstance was beginning to occur in hospitals using DRGs (Diagnosis Related Guidelines). Patients with multiple diagnoses were being assigned multiple DRGs. The physician was required to sign the chart indicating multiple diagnoses. Each DRG had a fixed payment assigned to it. The payment for each DRG was unchanged, even if the diagnosis used excessive resources for that particular patient. This bit of irrationality occurred during the attempt to quantitate the value of care. Physicians developed the ability to give better care using more complex procedures. However, the physicians care was being limited due to the restriction of payment from the DRG system unless that cost of care could be compensated for by using multiple diagnoses and multiple DRGs. The DRG coding profession was born. People were trained to extract multiple diagnoses from the documentation in the chart. The more DRGs you had as a patient during a hospital admission, the more the hospital payment the hospital received.
Physicians reacted to the increase in documentation, surveillance, as well as the difficulty in getting pre-approval for care. The pre-approval of care limited the patients’ access to care. The paperwork was overwhelming. The paper work necessary to complete a claim, at times, was longer than the patient-physician encounter. If there was the slightest entry error in the claim, payment was delayed. Hospitals were more organized than physicians. The hospitals already understood the changing systems and processes. As a result, paperwork did not bother hospital nearly as much as it did physicians. They somehow compensated for the increased cost of processing claims. I will get into the compensation for increased cost of claims in more detail in the future.
A spending cap was placed on Medicare. The fees for visits and procedures continued to rise in both the private and Medicare sector. The physician had to learn to document and quantitate outpatient visits and procedures
The cost of delivering care continued to rise due to inflation and technology. The government permitted moderate increases in fees along the way. The phenomenon of cost shifting was becoming intolerable to the employers (Business) who were still providing first dollar coverage medical insurance for their employees.
Despite the price cap and spending cap, the cost to the government was getting further out of hand. The insurance industry was happy. It was the broker and collected 6% of the money spent in the system the more they collected for their fee. The private sector face 10-20% increases in insurance rates each year. The more money the system generated, the more the insurance industry charged the employer. The physicians and hospitals were becoming unhappy. Even though there was more money in the system, collecting the money became more costly and difficult. Their information systems could not keep up with the changes. The result was less profit. Business was becoming extremely unhappy because the cost of insurance for their employees was approaching 18% of their gross revenues.
What happened next served to intensify the healthcare system’s problems even further.