The trade-off between cost containment and quality enhancement under the DRG payment model.

backgroundThe literature has demonstrated that the Diagnostic Related Group (DRG) payment model has been effective in controlling healthcare expenditures. However, there has been a growing concern that an excessive focus on cost reduction could potentially undermine the quality of care provided to patients. This study investigated whether the adoption of the DRG payment model could achieve the dual goal of cost containment and quality enhancement.

methodsThis repeated cross-sectional analysis included 256,438 individuals aged under 18 years with at least one inpatient visit at a Children’s specialized hospital in China from 5 May, 2019 to 31 December, 2022. Individuals with public health insurance coverage form the treatment group, while those without such coverage form the control group. Inpatient expenditures were measured by total inpatient expenditures, inpatient expenditures reimbursed by public health insurance programs, and out-of-pocket inpatient expenditures. Inpatient quality was assessed by readmission rates, length of stay, and recovery rates. The difference-in-difference framework was used to estimate the impacts of adopting the DRG payment model on inpatient expenditures and quality.

resultsBefore the implementation of the DRG payment model, the total inpatient expenditures for the control group and the treatment group averaged at 9,553 CNY (1,311 USD) and 10,685 CNY (1,466 USD), respectively. The implementation of the DRG payment model led to a reduction of -1,351 CNY (185 USD) in total inpatient expenditures. The reduction in total inpatient expenditures was attained through a decrease of -1,787 CNY (245 USD) in inpatient expenditures reimbursed by public health insurance programs but was offset by an increase of 437 CNY (60 USD) in out-of-pocket inpatient expenditures. In terms of quality outcomes, the implementation of the DRG payment model was associated with a 17%, 3% and 25% decrease in readmission rates, length of stay, and recovery rates, respectively.

conclusionsAfter the implementation of the DRG payment model, inpatients incurred significantly lower inpatient expenditures but experienced a decline in their recovery rates. Establishing a monitoring system alongside the implementation of a reward and punishment system is crucial to ensure the quality of care under prospective payment reforms.