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LCQ1: The Diagnosis Related Group model introduced by Hospital Authority

     Following is a question by the Dr Hon Leung Kau-lau and a reply by the Secretary for Food and Health, Dr York Chow, in the Legislative Council today (June 6):


     "My Health My Choice", the second stage consultation document on healthcare reform, pointed out that "the Hospital Authority (HA) has already been adopting the diagnosis-related groups (DRG) methodology covering a comprehensive range of public medical services provided in public hospitals for its internal costing and resource allocation purposes. Given that the hospital services provided by HA encompass most if not all hospital admissions and ambulatory procedures that may be provided in the private healthcare sector, the DRG structure and methodology developed by HA can be adapted for application in the private health sector, utilising the expertise already built up in HA without reinventing the wheel and duplicating the investment. However, much additional work would still be needed to establish the costing and pricing in the private sector based on DRG methodology, given that these are necessarily different from those in the public sector".  In this connection, will the Government inform this Council whether it knows:

(a) the DRG classification already adopted by HA and the related treatments and operations;

(b) the total numbers of person-times receiving the DRG-related treatments and operations mentioned in (a) and the total service costs in the past five years, as well as the relevant figures in different hospital clusters; and  

(c) the method for calculating costs (including the actual value of various parameters and the formulas used) adopted in the public sector for the DRG-related treatments and operations mentioned in (a); and the method for calculating costs adopted in the private sector?



     My reply to the three parts of the question is as follows:

(a) Many advanced countries have adopted a casemix model as part of the system to calculate the cost for the acute in-patient services.  In 2009-10, the Hospital Authority (HA) introduced an internationally-accepted casemix model, namely the International Refined - Diagnosis Related Group (IR-DRG), to provide a fair and transparent system for calculation of the quantity and efficiency of acute in-patient services.  As for non-acute in-patient services and psychiatric services, there are many other different international casemix models available for use.  HA is still exploring the possible directions in this regard.

     Under the DRG system, all possible combinations of over 20,000 diseases and related treatments and procedures set out in the International Classification of Diseases (ICD) are classified into about 1,000 groups.

     The ICD was established by the World Health Organisation (WHO) of the United Nations to provide standard codes for the classification of diseases and other health problems.  Member states of WHO use ICD data as the basis for compilation of statistics on national mortality and morbidity rates.  Many countries apply such data to epidemiology, health management, clinical activities and decision-making on resource allocation.

     By adopting the DRG system, HA classifies each patient episode into different group codes so that it can calculate the workload of hospitals properly according to the number of cases of various groups and the complexity of the cases handled by hospitals.

     Since there are a large number of diseases and groups, I will not explain them one by one here.  Members may wish to refer to the websites listed at Annex for more details on the background of ICD, the casemix model and DRG.  

(b) and (c) HA started to adopt DRG for internal reference purposes in 2009 to facilitate its internal costing and resource allocation.  The relevant clinical information and the examination of cost figures need to be improved through more thorough deliberation and assessment as well as continuous refinement.  In the past three years, the total number of attendances for acute in-patient services was about 1.3 million to 1.4 million, and the relevant costs of such services in 2010-11 calculated with application of DRG accounted for about 50% of the total expenditure.

     In fact, casemix is a highly specialised and technical issue.  I would try to illustrate it with a common example.   For instance, the episode of a patient who needs to be hospitalised for thyroidectomy will be assigned a DRG code by the system according to the primary cause of illness and the procedures required.  The service costs of this episode, including the direct services of clinical specialties (e.g. the services provided by surgeons and nurses), the various drugs required by the patient, the costs of pathological and radiological services, the surgery and other relevant expenditures, the various non-clinical support services and daily expenses of the hospital (e.g. meals for the patient, repair and maintenance of medical equipment and machinery) and some institutional recurrent expenditure etc. will be calculated altogether.  After liaising with various stakeholders, HA will set different parameters for different episodes so as to estimate the resources used in each episode.  Then, HA will arrive at an average value of all patient episodes assigned with the same DRG code in the year and calculate the relative value of this DRG code by a standard statistical methodology.  For instance, the relative value of a thyroidectomy case is 2.3.  As another example, the relative value of a general case in which a patient uses acute in-patient service for back problems without the need for operation is 1, whereas the relative value of a complicated liver transplant case is 37.  That means the resources required for providing services to the patient in the complicated liver transplant case is about 37 times of those for the patient with back problems.  In brief, a more complicated illness has a higher relative value, which means that more resources are required.

     At present, HA has adopted the DRG methodology to facilitate its internal costing and resource allocation.  It has also projected, based on the principle of financial prudence, various medical-related costs.  However, as HA's DRG system is still in the course of development and refinement, the clinical information and the examination of cost figures need more thorough deliberation and assessment.

     As for the private healthcare sector, their costing method and model of operation are not the same as those of the public sector.  For instance, compared with the public healthcare system, the private sector will take into account more factors, such as the costs of hospital construction, land premium, profit risks, marketing costs, investment returns etc., in calculating their service costs.  These factors are not taken into consideration by the public hospitals.

Ends/Wednesday, June 6, 2012
Issued at HKT 12:50


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