Payment Reform Pilot In Beijing Hospitals Reduced Expenditures And Out-Of-Pocket Payments Per Admission

TLDR

China announced in 2009 a shift from fee‑for‑service to prospective, aggregated payment methods, including diagnosis‑related groups (DRGs), to curb health expenditures. The authors selected six Beijing hospitals in October 2011 and compared their discharge data with eight fee‑for‑service controls from 2010‑12 using a difference‑in‑differences design to evaluate cost containment. DRG payment lowered health expenditures by 6.2 % and out‑of‑pocket payments by 10.5 % per admission, without raising readmission rates or cost shifting, though continued fee‑for‑service use for older or more complicated patients reduced the reform’s overall effectiveness. Continuous evidence‑based monitoring and robust management systems are needed for China and other low‑ and middle‑income countries to broadly implement DRGs and refine payment systems.

Abstract

In 2009 China announced plans to reform provider payment methods at public hospitals by moving from fee-for-service (FFS) to prospective and aggregated payment methods that included the use of diagnosis-related groups (DRGs) to control health expenditures. In October 2011 health policy makers selected six Beijing hospitals to pioneer the first DRG payment system in China. We used hospital discharge data from the six pilot hospitals and eight other hospitals, which continued to use FFS and served as controls, from the period 2010–12 to evaluate the pilot's impact on cost containment through a difference-in-differences methods design. Our study found that DRG payment led to reductions of 6.2 percent and 10.5 percent, respectively, in health expenditures and out-of-pocket payments by patients per hospital admission. We did not find evidence of any increase in hospital readmission rates or cost shifting from cases eligible for DRG payment to ineligible cases. However, hospitals continued to use FFS payments for patients who were older and had more complications than other patients, which reduced the effectiveness of payment reform. Continuous evidence-based monitoring and evaluation linked with adequate management systems are necessary to enable China and other low- and middle-income countries to broadly implement DRGs and refine payment systems.