Why are doctors up in arms?

Chairman of the Korean Medical Association, Roh Hwan-kyu, right, speaks on the risks of drug-related group payment system at a press conference at the association’s office in Ichon-dong, Seoul, Monday. / Yonhap

Controversial medical payment reform holds patients hostage

By Noh Hyun-gi

The Ministry of Health and Welfare and the Korean Medical Association (KMA) are locked in a dispute over the implementation of a drug-related group (DRG) system, a new payment mechanism for all small- and medium-sized hospitals, starting next month.

The change means regardless of the specific type and amount of treatments a patient receives for seven types of operations, the hospitals will be paid a fixed fee decided at an initial diagnosis.

The United States and 12 European countries have adopted the system to cut healthcare costs and promote logistic efficiency.

Rejecting it, the doctors?association vowed to take a collective action such as not performing cataract surgery.

The physicians endorse the current pay-for-service (PFS) system in which Korea's state-run health insurance reimburses each service a doctor provides.

In a debate on TV on June 2, Kim Sun-min from the National Health Insurance showed a graph that indicates an increase on healthcare expenditure leads to lower healthcare quality to stress that Korea must tighten its belt.

However, the data draws from the Dartmouth Atlas of Healthcare which examines variations in Medicare, the program DRG was devised for. Therefore, the analysis actually proves the shortcoming of the upcoming reform.

In addition, the health ministry is backtracking even its own claim from 2011 that the structural flaw of the DRG payment is a deterioration of healthcare services. It had detailed so in its information material.

Now, the agency emphasizes that with the DRG system, citizens will pay less medical costs, and that the PFS system has driven overall medical expenditure. However, the potential risk on quality has been an international concern since the introduction of a DRG policy in the U.S. in the 1983.

This method provides incentives for doctors to cherry-pick patients, avoid expensive procedures, discharge inpatients earlier, and indicate wrong diagnosis codes. The countries that adapted the DRG partially and entirely have exhibited the side effects. This is not to say the conventional PFS program is ideal; this option motivates physicians to provide unnecessary services, increasing healthcare expenditure.

Fortunately, the upcoming reform will apply to cataract, tonsil and appendix removal, hernia and hemorrhoid treatment, uterine surgery and cesarean sections. This step poses less danger on medical quality because the procedures are relatively standardized.

Yet, the ministry plans to expand the payment method across more clinical areas which calls for a comprehensive discussion.

What is DRG

The DRG payment system is a form of case payment and prospective payment developed by Robert Fetter and John Thompson of Yale University.

The healthcare payer, usually insurance companies or the government, compensates doctors depending on the diagnosis.

For example, a doctor will receive the same amount of money for everyone diagnosed with certain severity of cataract.

Statistically, the system expects the same amount of medical treatment for each category or DRG. The change next month will impose 78 groups for the seven operation types.

The primary purpose of the payment schedule is to cut costs and to streamline the healthcare process (categorization and reimbursement). The advantages include simpler management of a clinic and reduced friction between audit agencies and hospitals.

The case payment differs from the widely used PFS in that the amount of reimbursement is determined prior to the end of treatment (prospective).

The PFS can call for unnecessary tests and procedures. The payment system also encourages technological advancements and development of new drugs.

DRG experience in U.S. and Europe

In the U.S. only Medicare, federal insurance for citizens aged 65 and older, has employed the case payment method since 1983. Since then, it has facilitated the data collection of health services use of the elderly and refined the reimbursement process.

Still, there is a wide variation across the 50 states; the Dartmouth Atlas of Healthcare attempts to document the differnces and stresses that the supply of health service, not cost, drives the utilization level.

Also, controlling the Medicare budget continues to be a hot topic for America, as seen in President Obama's attempts at healthcare reform.

The new direction hopes to reflect performance measurement to motivate doctors to provide better care; this aims to address both DRG and PFS policies' weakness.

Multiple researches show concerns over healthcare quality. A prospective payment method is correlated with an increased death rate, early discharge and increased re-admissions.

Though less well documented, observations in European countries have not dismissed the dangers of compromised healthcare quality due to DRG payment.

In France, 60 percent of the hospitals discharges that were audited by regional agencies in 2006 turned out to be coded incorrectly. In Norway, hospitals skimmed, or were more likely to treat patients that fall under high paying DRG, shortly after a case based payment was implemented in 1997.