What explains DRG upcoding in neonatology? The roles of financial incentives and infant health

J Health Econ. 2015 Sep;43:13-26. doi: 10.1016/j.jhealeco.2015.06.001. Epub 2015 Jun 9.

Abstract

We use the introduction of diagnosis related groups (DRGs) in German neonatology to study the determinants of upcoding. Since 2003, reimbursement is based inter alia on birth weight, with substantial discontinuities at eight thresholds. These discontinuities create incentives to upcode preterm infants into classes of lower birth weight. Using data from the German birth statistics 1996-2010 and German hospital data from 2006 to 2011, we show that (1) since the introduction of DRGs, hospitals have upcoded at least 12,000 preterm infants and gained additional reimbursement in excess of 100 million Euro; (2) upcoding rates are systematically higher at thresholds with larger reimbursement hikes and in hospitals that subsequently treat preterm infants, i.e. where the gains accrue; (3) upcoding is systematically linked with newborn health conditional on birth weight. Doctors and midwives respond to financial incentives by not upcoding newborns with low survival probabilities, and by upcoding infants with higher expected treatment costs.

Keywords: DRG upcoding; Hospitals; Neonatal care; Preterm infants; Reimbursement.

Publication types

  • Comparative Study

MeSH terms

  • Birth Weight*
  • Clinical Coding / classification
  • Clinical Coding / economics
  • Clinical Coding / trends
  • Cost Control / methods
  • Cost Control / standards
  • Cost Control / trends
  • Data Interpretation, Statistical
  • Diagnosis-Related Groups / classification
  • Diagnosis-Related Groups / economics*
  • Diagnosis-Related Groups / statistics & numerical data
  • Germany
  • Health Status Indicators
  • Hospital Mortality / trends
  • Humans
  • Infant
  • Infant Mortality / trends
  • Infant, Low Birth Weight
  • Infant, Newborn
  • Infant, Premature
  • Insurance Claim Reporting / economics
  • Insurance Claim Reporting / trends
  • Length of Stay / economics
  • Length of Stay / trends
  • Neonatology / economics*
  • Neonatology / standards
  • Neonatology / trends
  • Reimbursement Mechanisms / economics*
  • Reimbursement Mechanisms / standards
  • Reimbursement Mechanisms / trends
  • Statistical Distributions