China's DRG/DIP Reform: Bridging Medical Service Pricing and Supporting Tech Innovation
The DRG/DIP payment reform has curtailed the rapid expansion of China's public hospitals, shifting focus to quality and efficiency. By December 2023, 71% of 395 BMI pooling areas had embraced this model, aiming for nationwide coverage by 2025.
However, DRG/DIP reform in China uniquely preceded a comprehensive revamp of medical service pricing. Consequently, the core of the next phase of the payment reform will center on refining DRG weights and rates, aligned with supply-side reform efforts.
Additionally, fostering technological innovation is essential in the progression of China's public hospitals, with the development of supportive policies playing a crucial role in the upcoming stages of DRG/DIP implementation.
Refining DRG Weights and Rates alongside Medical Service Pricing Overhaul
Overview of DRG Rates, Weights, and DIP Relations
DRGs (Diagnosis Related Groups) categorize hospital patients into medically and financially similar groups based on diagnoses, procedures, and factors like age and comorbidities. They impose strict, top-down guidelines to regulate clinical practices.
In contrast, DIP (Diagnosis Intervention Packet) is rooted in big data analysis with more relaxed guidelines. It adopts clinical practices passively in a bottom-up fashion without prior validation.
In the DRG system, each group's relative use of resources is indicated by a weight. Payments for DRGs are determined by multiplying these weights by the city's average hospitalization costs, termed as rates. Conversely, DIP assigns points to each group to represent its resource consumption relative to other groups within the prefecture. The worth of these points varies with the prefecture's total medical insurance budget and the total points of all hospital admissions.
Essentially, the concepts of weights and rates in DRGs are akin to points and their monetary values in DIP, performing comparable functions in resource allocation and cost management.
Phased Weights and Rates Adjustments
China's early adoption of DRG/DIP payment reform, before major medical service pricing updates, resulted in inherited issues like regional price disparities, under-developed cost accounting, and inadequate compensation structures that fail to fully account for service delivery costs. Furthermore, insufficient price differentiation across medical institutions at different levels is stalling the country's progression towards a primary care-based, tiered healthcare system.
These challenges limit DRG/DIP's capacity to effectively shape provider behavior, a central aim of the payment reform. Consequently, the crux of China's DRG/DIP reform is in the recalibration of weights and rates, redistributing resources and payments among various specialties and hospitals in sync with the current medical service pricing overhaul.
The weights and rates adjustments are expected to progress in stages in concert with DRG grouping upgrades:
- Current stage: initial payments are set based on historical costs.
- Transition stage: payments for identical diagnoses are unified across the city by standardizing clinical practices and associated costs, narrowing regional disparities.
- Stable stage: differentiated rates emphasize tiered care, supporting primary facilities for common diseases and boosting rates for specialty disciplines in top hospitals.
