Improving patient-level costing in the English and the German ‘DRG’ system

ObjectivesThe purpose of this paper is to develop ways to improve patient-level cost apportioning (PLCA) in the English and German inpatient ‘DRG’ cost accounting systems, to support regulators in improving costing schemes, and to give clinicians and hospital management sophisticated tools to measure and link their management.MethodsThe paper analyzes and evaluates the PLCA step in the cost accounting schemes of both countries according to the impact on the key aspects of DRG introduction: transparency and efficiency. The goal is to generate a best available PLCA standard with enhanced accuracy and managerial relevance, the main requirements of cost accounting.ResultsA best available PLCA standard in ‘DRG’ cost accounting uses: (1) the cost-matrix from the German system; (2) a third axis in this matrix, representing service-lines or clinical pathways; (3) a scoring system for key cost drivers with the long-term objective of time-driven activity-based costing and (4) a point of delivery separation.ConclusionBoth systems have elements that the other system can learn from. By combining their strengths, regulators are supported in enhancing PLCA systems, improving the accuracy of national reimbursement and the managerial relevance of inpatient cost accounting systems, in order to reduce costs in health care.