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The impact of DRGs after year 4: controlling expense, chasing revenue.

The impact of DRGs after year 4: Controlling expense, chasing revenue

When Diagnosis Related Groups became a way of life for the nation's hospitals four years ago, many observers predicted strong controls on inpatient laboratory utilization. They were right and wrong.

Seventy-one per cent of the panelists in MLO's 1987 DRG survey said their laboratories have reduced or eliminated manatory admission tests (see Table I); 53 per cent said routine ordering of other tests has ended; 47 per cent said test order forms were altered; 15 per cent said medical department approval is required for certain tests; and 12 per cent use DRG algorithms for automatic follow-up testing. Several labs have instituted new rules for standing orders--for example, limiting such orders to a 72-hour period.

Most panelists--61 per cent, not a vast majority--said physicians at their hospitals are monitored for test ordering (Table II).

Six per cent judged these and other efforts to curb unnecessary testing very successful; 57 per cent, somewhat successful; and 37 per cent, unsuccessful.

The means of regulating laboratory utilization are diverse. In 69 per cent of the hospitals monitoring test ordering, committees help do the job. Also playing a role are DRG coordinators, in 57 per cent of the hospitals; administration, 43 per cent; medical department heads, 33 per cent; pathologists, 33 per cent; and peer pressure, 28 per cent. In many of these hospitals, lab utilization is discussed at medical staff meetings, and physicians are educated about proper ordering in other ways as well.

The laboratory manager at a small Midwestern hospital sits on a DRG committee, which reviews Medicare and Medicaid patient charts. Other committee members are the utilization review coordinator; the chief financial officer and assistant administrator of the hospital; the nursing supervisor; and the medical records director. After reviewing the charts, the committee recommends changes in practice and further documentation, if necessary.

Ruth Anderson, administrative laboratory director at 336-bed Virginia Mason Hospital in Seattle, said reductions in different tests have not been substantial thus far, but that may change. "We're part of a pilot project nationwide to analyze ordering patterns by Diagnosis Related Group. It has been organized by a private firm, which intends to use the database as a research tool.

"Our pharmacy group was part of a related program that developed a lot of valuable information. For us it will provide a cumulative database and a unique opportunity to see how we compare with our peers.'

Sometimes even the best data don't help, however. A laboratory administrator at a large teaching hospital said the hospital information system tracks and reviews test orders, but residents nevertheless order nonessential tests as part of the learning process. "We can track orders, but we can't do much about it. If we had physicians from outside our hospital overordering, we could say, "We're going to restrict your privileges.' But with our own staff, we can't do that.'

Laboratories that did not meet with success in trying to cut unnecessary test orders blamed physician resistance to change, combined in some cases with a fear of malpractice action. Other problems cited were a lack of pathologist involvement, reluctance to tell physicians about their transgressions, and only token efforts to control lab utilization.

Table III shows that urinalysis orders were curbed most often, in 28 per cent of the hospitals that monitor test ordering. Reductions were also achieved in complete blood counts at 26 per cent of the hospitals; crossmatches, 26 per cent; profiles, 21 per cent; differentials, 18 per cent; cultures, 15 per cent; rapid plasma reagin testing, 15 per cent; electrolytes, 13 per cent; and creatine kinase testing, 13 per cent.

Twenty-seven per cent of the laboratories have switched to computerized test ordering since DRGs were introduced, and 40 per cent went to computerized result reporting.

Sixty-nine per cent of the laboratories in the survey have microcomputers and/or lab information systems. Of these, 61 per cent use their computers as part of a network interfacing with automated instruments or their hospital's computer; 19 per cent use their computers to monitor costs per case or per DRG; and 11 per cent use their computers to monitor clinician ordering per case or DRG. Seventy-two per cent hope eventually to use their computer to perform some or all of these functions.

Paul Symons, director of diagnostic services at Charlton Memorial Hospital in Fall River, Mass., said his 383-bed hospital has committed to a patient management computer system with a terminal in every nursing section for test ordering, among other uses. "These orders are displayed in the laboratory in a form that says the patient needs certain work done by a certain time. Once the results are generated in the lab and validated, they are sent back to the nursing station. This eliminates manual transcribing onto physician order sheets.

"This system makes accountability a lot better,' Symons said. "We can check for Stat abuse. We can also probably determine physician ordering patterns.'

Only 12 per cent of the hospitals have purchased software designed to track testing for DRG-related trends, and only 8 per cent have developed their own software for that purpose. But laboratorians at these institutions are enthusiastic about the impact the programs can have on unnecessary test orders.

Kenneth M. Sosnowski, micro-biology chief at the 827-bed Veterans Administration Medical Center in Salem, Va., said a trial is being held on a preliminary version of new DRG software for the VA system. "They've taken the top 20 DRG categories and passed out questionnaires to physicians, asking which tests are required for diagnosis, for therapy, and for cure. This information will be fed into the computer as a list of tests for different admitting DRGs. Then the computer will review orders and flag those tests that are not on the list, for investigation as possibly unnecessary.'

David M. Childers, administrative head of the pathology department at 315-bed St. Joseph Hospital in Reading, Pa., said his institution has developed software that calls up all DRG admissions for a certain time period and lists what services were used to treat the patients. "The software needs to be polished significantly, because at the moment it defines the total lab services used, and not the specific tests that are involved in those circumstances. A DRG might have run $875, of which $100 was maybe for CBCs or for three or four sophisticated enzyme studies that add up to the same amount. The specific elements are not isolated.

"Our ultimate intent is to establish the mean, plus or minus the standard deviation, for lab services. Say a second cholesterol is ordered for a particular DRG-- the computer could ask the doctor, "How come?' There may be a very valid clinical reason for it, but at least things would be subject to audit.'

Besides reviewing test ordering, hospital laboratories have taken other steps to ease financial pressure. For example, since prospective payment was introduced, 76 per cent of the labs have sought competitive bids from reference facilities (Table IV). Another popular way to save money, mentioned by 60 per cent of the panelists, is to secure volume discounts by joining other hospital laboratories in group purchasing. Very few of the panelists had been involved in mergers, but 15 per cent said their laboratories shared in-house testing services with other laboratories.

Financial improvement can also be achieved through revenue gains, which brings us to the thriving area of outpatient testing. Total outpatient test volume rose at 94 per cent of the surveyed laboratories in 1986, by an average of 15 per cent.

Three-quarters of the laboratories actively marketed their testing services (see Table V). More than 90 per cent marketed to physicians' offices, 66 per cent to nursing homes, 28 per cent to veterinarians, and 27 per cent to ambulatory care centers.

Among other outpatient testing markets named by panelists were industry, targeted especially for drug testing; the general public, brought in through newspaper advertisements; dialysis centers; health maintenance organizations; and small hospital labs.

Karl A. Propst, senior technologist at 101-bed Mercy Medical Center in Durango, Colo., said his hospital administrator encouraged all departments to draw up marketing plans even before DRGs. As a result, the laboratory captured 80 to 85 per cent of the physicians' office market and all of the business from veterinarians in town.

A college health service also signed up with the lab. "They heard about the marketing we were doing for the doctors' offices and some of the billing arrangements we had set up. And they liked it so much they asked us if we could set up the same kind of account for them.'

But a Texas laboratory manager was not as optimistic about his lab's outpatient efforts. "I don't see our physicians' office business increasing next year as much as I'd like to. We're in a metropolitan area of about 225,000, and we compete with six other hospitals and two reference labs. At the prices I would have to charge to be competitive with the reference labs, it is not a wise market to pursue. There just would be no return on investment.'

Seventy-two per cent of the laboratories that market outpatient testing offer courier service, 51 per cent provide phlebotomy at client sites, 33 per cent have installed computer terminals at client sites, 21 per cent have established satellite labs, and 16 per cent have opened area blood drawing stations.

Price discounts are an important marketing tool. John Chavez, administrative laboratory director at 100-bed Heights General Hospital in Albuquerque, N.M., helped initiate a program that offered 30 per cent off inpatient test fees for outpatient services. "We sent a letter to all members of the medical staff to make them aware of the discounted schedule and encourage greater use of our outpatient service, rather than have physicians send tests off to independent labs.'

Asked what has been their biggest problem related to the DRG system, the panelists gave a wide range of answers. Twenty-nine per cent agreed that staff cuts leaving behind overworked employees were the main difficulty they currently faced or anticipated. Twenty-seven per cent cited cost containment and budget cuts. Other problems, in descending order of prevalence, included reductions in quality and productivity, lower morale, less funding for instruments, loss of revenue, physician failure to comply with test ordering guidelines, and longer turnaround time.

More than one respondent complained that the DRG system treats rural hospitals unfairly. David Quast, chief technologist at 92-bed United Memorial Hospital in Greenville, Mich., said: "We're considered a rural hospital by the Government, even though we're only 20 miles from a major metropolitan area where there are four hospitals, each with 400 beds or more. We are paid as a rural hospital, which means we get (varying with Medicare and Medicaid) approximately 20 per cent less than an urban hospital.

"That's the big problem. As far as wages and costs go, ours are just as high as those of a metropolitan hospital. We're competing in the same market. That's why there's a drive on the part of small hospitals, at least in Michigan, to make reimbursement equal from hospital to hospital.'

Karl Propst's hospital, Mercy Medical in Durango, feels a similar pinch. "We're doing a lot more than most 110-bed hospitals, many more innovative procedures. We're trying to get regional referral center status from Medicare, because we're isolated. Regional referral centers get better reimbursement than rural hospitals do. We've got 30 specialties and 95 doctors on the staff. The only thing holding us back is the number of admissions.'

Abbas Chhatriwalla, administrative laboratory director at 260-bed Providence Hospital in Sandusky, Ohio, said that keeping up with ever-changing DRGs was his biggest annoyance. "The changes in the Federal reimbursement schedule that are issued usually come to me inconsistently. Sometimes I learn about them right away, and sometimes I don't learn about them for months. Auditing payments takes a tremendous amount of time.'

Chhatriwalla said his hospital is thinking of going to DRG consultants who are paid a percentage of whatever money they can save the hospital.

David Childers in Reading, Pa., summed up his biggest fear: "I am deeply concerned that we must watch the thrust to conserve on costs and make sure that DRG activity is not compromising quality of care. Physicians have to make judgmenmts that are financial and sometimes in opposition to their clinical judgments.

"I have been in the field for 36 years. I was here before Medicare. I fear greatly any wish to reduce costs at the risk of compromising the quality of care.'

Table: I Some hospital lab tactics used to control utilization since DRGs

Table: II Are clinicians monitored for test orders per DRG?

Which of the following help regulate ordering?

How effective are these efforts?

Table: III Which tests have dropped in volume because of monitoring?

Table: IV Other strategies for savings under DRGs

Table: V Has the lab sought to market outpatient testing?

To what markets?
COPYRIGHT 1987 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1987 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:part 2; diagnosis related groups
Author:Gore, Mary Jane
Publication:Medical Laboratory Observer
Date:Dec 1, 1987
Previous Article:The impact of DRGs after year 4: a swing to better times.
Next Article:Making home transfusions work.

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