Variation in national DRG payments for laparoscopic cholecystectomy: Hospital level analysis

Pushwaz Virk, MD, Charudutt Paranjape, MD. Akron General Medical Center, Akron, OH.

Introduction: In 2013, Centers for Medicare and Medicaid Services (CMS) released data about Diagnosis Related Group (DRG) payments made to over 3000 acute care hospitals in 2011. The data included the average amount billed to CMS by each hospital for top 100 DRGs, as well as average amount paid to the hospital those DRGs in one year. DRG system is a fixed reimbursement to hospitals for Medicare patients based on diagnosis, procedures, age and expected length of stay. Each DRG is further classified into three severity types – With Major Complications or Comorbidities, With Complications or Comorbidities and Without Complications or Comorbidities. The payment rate is determined by multiple factors including local wage index. Laparoscopic cholecystectomy (LapChole) is one of the most common and established surgical procedures. We analyzed LapChole DRG data to assess the variability of Medicare payments across all hospitals in US.

Methods: We identified hospitals which had billed for more than 10 discharges in a year for two commonest LapChole DRGs – Laparoscopic Cholecystectomy without Common Duct Exploration with Complications or Comorbidities (DRG 418) and without Complications or Comorbidities (DRG 419). There were a total of 18,227 discharges in DRG 418 and 16,157 in DRG 419. The dollar amounts were rounded.

Results: For DRG 418, 959 acute care hospitals were included. National average of charges submitted to CMS by hospitals was $48,091 and average payment made to hospitals was $11,518. Highest average charge was submitted by Crozer Chester Medical Center, Upland, PA of $173,772. Lowest average charge was $11,689 submitted by Anne Arundel Medical Center, Annapolis, MD. Highest average payment by CMS per discharge was $25,205 made to UCSF Medical center, San Francisco, CA and lowest payment was $8,117 to Thomas Hospital, Fairhope, AL. For DRG 419, 871 hospitals were included. National average payment was $8,068 against the average submitted charge of $34,724. St Mary & Elizabeth Medical Center, Chicago, IL received the highest payment of $16,207 and lowest payment was to Thomas Hospital, Fairhope, AL of $5,710. Highest average charge submitted was $140,449 by Northbay Medical Center, Fairfield, CA. The lowest average charge was $6,750 by Gallup Indian Medical Center, Gallup, NM. Florida Hospital, Orlando, FL had the highest number of discharges in either category. There was a variation of over 1400% in the submitted charge for the same DRG severity type and over 300% in payments made. There was no significant difference in payments based on the hospital ownership type. However, the submitted charges by hospitals were significantly higher by proprietary hospitals compared to government owned or non-profit hospitals for both DRGs.

Conclusion: The analysis enables surgery programs to compare and benchmark against their peers regionally or nationally. The information is also beneficial to patients who have to pay out of pocket for this surgery. DRG system does not reward efficiencies nor incorporates surgical outcomes, so with emerging healthcare environment focusing on cost control and improving efficiencies, newer payment methods may need to be instituted.

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