Hospital payment mechanism tweaks to benefit patients

China is tweaking the existing payment mechanism adopted by hospitals to make it more beneficial for patients as part of its deepening medical reforms.

The National Healthcare Security Administration and three other departments jointly issued a circular in early June indicating that the nation will launch a pilot program of diagnosis-related groups, or DRGs, a patient classification to standardize medical insurance payment, in 30 cities.

Patients will be categorized into DRGs with similar clinical symptoms and resource costs according to their age, gender, length of stay and clinical diagnosis. Medical fees and insurance payments will thus be based on DRG classification instead of specific patients.

The pilot cities, including Beijing, Tianjin and Shanghai, are scheduled to start the new payment mode in 2021 before a simulated run in 2020, said the circular.

Shen Shuguang, vice-president of the China Association of Social Security, said during an interview with the People's Daily that DRG payment is beneficial to standardize diagnosis and treatment and improve the efficiency of medical insurance fund use.

In the past, China's hospitals charged patients for treatment projects, and the more medicine and treatment a doctor gives to a patient, the more he as well as the hospital where he works can earn. With the new charging method, doctors' and hospitals' income will be based on hospitals' cost control.

Feng Guosheng, director-general of Beijing Chaoyang Hospital, said that 'the new charging method is beneficial to mobilize the enthusiasm of hospitals and medical professionals to reduce costs and improve service quality, control the unreasonable growth of medical expenses, and promote the transformation of medical institutions' operational mechanism".

Specifically, he noted that through timely evaluations of medical expenses and cost analysis, DRG will reinforce hospitals' operational control. "The hospitals' profit and loss are clear at a glance. Administrators can quickly spot the problems, whether they are from inappropriate use of consumables, excessive use of drugs, or unqualified treatment."

Statistics from the National Health Commission showed that in 2018, China's total medical expenses reached 5.8 trillion yuan ($842 billion), accounting for 6.4 percent of the gross domestic product. Residents' personal medical expenses totaled 1.67 trillion yuan, or 28.7 percent of the total medical expenses.

"Apart from the medical reimbursement, I spent over 3,000 yuan at my own expense in hospital last year. Once a doctor recommended me to conduct a gynecologic examination, which was not covered by the healthcare insurance, it cost me nearly 1,000 yuan. I sometimes feel overcharged by the hospital," said Zhang Yuan, a 40-year-old civil servant in Beijing.

"The new charging method means that medicine, consumables and inspection items will no longer be an income source for doctors. Doctors are no longer motivated to give as many inspections as possible, but to control costs on the basis of curing patients," said Liu Zhichen, a DRG expert at the National Health Commission.

"The payment system based on DRG helps hospitals to build a mechanism that benefits patients more, in that they are encouraged to shorten the patients' hospitalization period to control treatment costs," she said.

However, implementing DRG is challenging for Chinese hospitals which have got used to the traditional charging method. "Currently in China, there is no standard for DRG classification, and the difficulties lie in precise clinical diagnosis classification and clinical operation cost accounting," said Wang Yipeng, director of the Chinese branch of the International Classification of Disease under the World Health Organization.

"This requires a thorough reform of the hospitals' operation mode. Through DRG research, hospitals can make comparisons between various treatment plans and find out the best clinical solution with low cost and high efficiency. Hospitals are encouraged to control medical costs by shortening average duration of hospitalization and lowering patients’ induced medical consumption," Liu said.

Research showed that after Germany implemented the DRG method, patients' average duration of hospitalization at 750 trial hospitals decreased by 30 percent. In the meantime, numerous private hospitals in Germany achieved robust development because of competitive advantages.

"The DRG reform is both a challenge and an opportunity for hospitals. If they can quickly change their business philosophy and establish strategic goals for efficient operation, they will be able to realize core competitive advantages and achieve sustainable development," Liu said.