Surgonomics as a health care financing policy for hospitalized surgical patients

The Medicare system of prospective payment to hospitals based on diagnostic related groups (DRG) has been severely criticized at a number of levels. Many states are using DRG prospective 'All Payor Systems' for reimbursement to hospitals with the federal DRG system as a model. In All Payor Systems, Medicare, Medicaid, Blue Cross and other commercial insurers pay by the DRG mode; the state of New York has been All Payor since 1 January 1988. This study simulated DRG All Payor methods on a large sample (N = 17,560) of surgical patients for a two year period, using both federal and New York DRG reimbursement methods currently in effect. Both Meicare and Medicaid patients had, on average, a longer length of stay in the hospital and higher total cost of hospitalization compared with patients from Blue Cross and other commercial payors. Medicare and Medicaid patients also had a greater severity of illness compared with patients from Blue Cross or other payors. All except commercial insurors (that is, Medicaid, Blue Cross and Medicare) had greater financial risk under the DRG All Payor scheme. Results from our study suggest that federal, state and private payors may not be adequately reimbursing health care providers for the care of the hospitalized surgical patient under the DRG prospective scheme of hospital payment. It appears that the financing policy for health care, especially at the federal and state level, could limit both the access and quality of care for surgical patients.