How do inpatients’ costs, length of stay, and quality of care vary across age groups after a new case-based payment reform in China? An interrupted time series analysis

In China, health care spending has been increasing rapidly since 2009, a growth rate of 14.1% from 2009 to 2019, higher than that of gross domestic product (GDP) [1], given the aging population [2]. By 2030, those older than 65 in China will go from 115 to 240 million, and those over 80 will soar from 12 million in 2000 to more than 40 million [3]. These demographic changes demand more healthcare, and the growth of per capita health care cost for older adults was increasing faster than other age groups [4]. Per capita health care cost for older adults was about 3–5 times higher than costs for other adults. It is estimated that China’s expenditure with older adults will almost double over the next three decades, increasing from 138 billion CNY in 2015 to 263 billion in 2050 [5].

In recent years, a new case-based payment system called diagnosis-intervention packet (DIP) was developed and piloted in China to increase transparency of resource consumption by standardising reimbursement and achieve greater efficiency by reducing unnecessary services. In 2018, DIP payment under regional global budget pilot reform launched in a large city in southeast China, relying on a new classification of patients based on combinations of the principal diagnosis, identified by the first four digits of ICD-10 code (International Classification of Diseases-10th revision) and procedures, identified by the ICD-9-CM3 code (International Classification of Diseases-Ninth Revision, Clinical Modification), resulting in a thorough classification of more than 10,000 groups. It differs from the previous fixed rate per admission with a cap on annual total compensation policy previously implemented in the city. It is a type of case-based payment under the regional global budget. Based on historical cost data, relative weights are assigned to patient groups to reflect market-wide (typically, at the prefecture-city level) resource utilization relative to different groups. Relative weights are then converted to payments according to the global insurance budget of the market [6]. Unlike the DRGs-based payment, DIP payment system mainly uses the ICD-10 and ICD-9-CM3 to identify the principal diagnosis and the procedure, respectively, while demographic and administrative variables (such as age, gender, and discharge status) are not used in classification. In addition, unlike the usual practice of the DRG-based payment in which the absolute reimbursements for each case are fixed in advance, the actual monetary payments are determined ex post based on the point value, although the relative values of DIP groups are fixed under the DIP-based payment [7].

Evidence from developed and developing countries showed that a case-based case-mix funding system might encourage inadequate practices, for example, selecting low-severity patients. Moreover, physicians might refuse complex patients because their treatment would lead to more resource consumption [8]. In China, the few studies that examined impacts of DRGs-based payment obtained mixed results on length of stay (LOS), mortality, cost and out-of-pocket (OOP) payments in all age groups [9‐11]. In contrast, studies on this topic in European countries focused on quality of care and health care expenditure among inpatients. For instance, older patients, especially those aged 75 to 80, were reported to have longer LOS and higher total costs under DRGs-based payment, as well as more diagnoses per patient and a greater mortality than younger patients [12‐14]. However, DesHarnais et al. [15] showed that age alone, in the absence of comorbidities or complications, only slightly increased hospital stay and resource consumption over most conditions for older Medicare patients. Importantly, international studies demonstrated that older groups present a challenge to the DRGs-based systems.

We hypothesized several changes following the DIP-based payment implementation. First, incentives for hospitals to decrease the probability of refusing elderly patients within the actual DIP, as the weight for older adults is recalibrated. Specifically, 1 percentage point will be added if the proportion of the number of inpatients of the elderly aged 60 or above in the designated medical institutions is equal to or greater than the average level of the pilot city. Second, expenditures per admission might increase, as the actual payments for cases treated are flexible rather than fixed in advance to contain total hospital reimbursements within the predetermined regional healthcare budget, thus the demand for medical services may be released. In addition, short anticipated length of stays, in order to cost savings. Finally, under the strong incentives of costs reducing, the quality might be affected.

The association between case-based payment, healthcare quality, healthcare expenditure and OOP payments in older adults have not been widely examined in China. Internationally, there is significant inaccessibility to service and unintended consequences with healthcare costs and quality of care among older patients under prospective payment systems [16‐18]. If the case-based reimbursement scheme is inequitable, the current prospective payment system may provide a financial disincentive for hospitals and have adverse effects on hospital behaviour.

This study evaluated the impact of a DIP payment reform pilot in a large city in southeast China, in order to examine its association with health care outcomes (in-hospital mortality and LOS) along with its effect on total costs per case and OOP payments in different age groups, especially older patients. This study provides information to hospital administrators for achieving better health care services for older adults under the implementation of DIP-based global budget payment.

In this study, the implementation of DIP-based payment system was associated with significantly increase of monthly trend of total costs per case in the whole sample and older adult group. OOP payments presented an upward trend in the oldest-old group after the DIP-based payment. DIP reform resulted in a slight reduction of monthly trend of LOS in the young-old group and a significant increase in the oldest-old group. The in-hospital mortality showed a monthly downward trend in the older group after the DIP-based payment, while the result was not statistically significant.

The supply of medical services among the older group might increase in the period after the reform, thus improving patient accessibility. Total costs per case tend to be greatest among oldest-old group—associated with long lengths of stay and more intensive medical investments. The incidence of comorbidities and functional impairment is higher in older adults: oldest-old patients had more diagnoses and higher severities and the cost typically exceed those in other age groups [27]. Previous studies arrived at similar conclusions, suggesting that resource use within DRGs-based payment may vary according to health severity [28‐31]. Current findings support the view that DIP-based payment system will account for the most differences in costs.

DIP-based global payment system implementation was associated with an increase of monthly trend in OOP payment among the oldest-old group, but no significant differences were found, possibly since DIP payment reform itself has no inherent incentive for changes in OOP payment. It also implies that physicians did not significantly increase OOP use, not placing the burden on patients, despite the increase in the annual total costs per case. The DIP payment reform implementation might have the smaller effect of relieving the financial burden on severe patients. Furthermore, although there is a risk of hospitals mainly focus on patients whose treatment costs are borne by themselves, and reject or just avoid Medicare patients, our study did not observe this phenomenon.

Changes in LOS were observed in young-old groups. The implementation of DIP-based payment may have stimulated behavioural changes leading to efficient discharge planning, higher reimbursement for older adults with higher severity [26]. On one hand, the increased severity of diseases found in young-old patient group may be mainly chronic and lead to more frequent discharges rather than more intensive care during individual discharges. On the other hand, compared with increasing LOS, more cost-effective mechanisms might be provided by the hospital for young-old patients to reduce mortality. Further, hospitals have the choice of either providing more nursing care (or other support) for patients over 80 or keep them longer under DIP.

Several factors may be behind the monthly downward trend of in-hospital mortality in the older Medicare patient group, partly because a shorter LOS per se is due to less time facing risks. Hospitals may tend to develop clinical pathways for more efficient care delivery without deteriorating the healthcare outcomes under the implication of DIP [32]. However, the previous literature does not examine the impact of DRG-based payment systems on in-hospital mortality across different ages. Quality outcomes, in terms of mortality, are helpful indicators to evaluate DRGs-based payment but have been criticised as insufficiently sensitive for healthcare quality [33].

The DIP reform has received the attention of policymakers in China. Current findings suggest that DIP-based payment can achieve real changes in the delivery of health care in hospitals. There is no discrimination against specific types of patients. Our results suggest that hospital reimbursement would be more equitable if age (especially ≥ 65 years) was considered in determining hospital reimbursement. Importantly, DIP-based payment facilitates the comparison of the difference in treatment costs between different medical institutions for the same illness combination, effectively promoting the professional division of labour and competition among medical institutions in the region, which can contribute towards assessing and supervising of competent departments [34]. This is the first study to evaluate the effect of DIP-based payment on cost, quality of care, and OOP payments across different age groups. It can enable the development of efficient and appropriate healthcare strategies to improve care quality. Moreover, it encourages further large-scale, multicentre studies.

Our study has some limitations. First, the sample are patients covered by the urban employee basic health insurance scheme (UEBHIS), limiting the generalisability. But individuals with UEBHIS represent most of the medical insurance population and demonstrated the greatest effect of DIP care quality and cost. Second, our study included only a short-term implementation period of the DIP-based global payment. Future studies are needed to evaluate the long-term impact of the DIP-based global system on cost, quality, and OOP payments. Third, our study included patients at all age groups but did not consider possible variations in health during different ages. Fourth, findings are likely to be influenced by additional factors, health status, severity of illness and social settings, which should be explored.

The DIP-based payment system slightly increased the total cost per case of older and oldest-old adults, and reduced LOS of younger and young-old patients without deteriorating quality of life. The oldest-old group had more diagnoses and higher admission severity of diagnosis per patient, demonstrating higher OOP payment and longer LOS. These findings suggested that the DIP-based payment system may be adequate for older adults and support the continued implementation and enlargement of the DIP-based payment system in China, given its potential for inducing a shift in hospital supply services. Further studies are required to evaluate the association of the DIP-based payment system with in-hospital care to improve both the effectiveness and medical quality of the health care system.