UAE: Shift to DRG system will transform health insurance
Source: Middle East Insurance Review | Sep 2017
The imminent shift to the international refined diagnosis-related group (IR DRG) system by healthcare providers in Dubai will completely transform insurers’ payment approaches to healthcare providers.
The new structure aims to eliminate over-prescription by moving the burden of cost to the healthcare provider itself. In short, providers will be paid a fixed base rate, multiplied by a factor for each DRG code, according to an analysis by Frost & Sullivan.
The DRG system is a patient classification scheme which provides a means of relating the type of patients a hospital treats to the costs the hospital incurs. DRGs consist of classes of patients that are similar clinically and in terms of their consumption of hospital resources.
Healthcare providers must prepare for the shift to the new system or be caught off-guard when pricing structures change in 2018, said the report.
“To make their margins, healthcare providers now have to work backwards from the price they will get paid. They will also need to firmly control their costing for each procedure. Failure to do so will result in lower or no margins. Moreover, this must be done without compromising the quality of care and outcome,” said Frost & Sullivan Healthcare and Life Sciences’ Senior Consultant Vivek Shukla.
As fixed prices replace fee-for-service, and price-based costing substitute for cost-based pricing, healthcare providers must prepare early to garner maximum benefit. Healthcare providers that are clear about cost structures and effectively manage without comprising on quality will gain the competitive edge over competitors.
To comply with the new insurance environment and to remain profitable when the prices are fixed for various medical procedures, healthcare providers must:
- Immediately deploy costing tools: As base rates and multiples will be assigned on the basis of rates during and before the shadow-billing phase, costing tools can offer clarity on the margins of the procedures being performed and strengthen cost management;
- Scrutinise and reset processes: Everything from operational flows, supply chain, work force utilisation, and equipment maintenance must be scanned to assess obvious and hidden cost drivers for corrective action;
- Rethink service mix and refresh marketing: As efficiencies in various departments or service lines are streamlined, the service mix may change, compelling fresh marketing efforts and realignment of future plans; and
- Re-engineer budgets: The way budgets are created and revenues and costs allocated will change as the basis for future calculations are altered. M