Data Trends

With pressures mounting to contain cost, benchmarking clinical performance becomes increasingly important. Often such analyses are conducted at the broad overall cost per case level by MS-DRG. Although this level of analysis could indicate possible means to savings, another step is needed to determine which cost center of the service provided could benefit most from improvement. Analyzing cost by department for specific services, therefore, is an important next step in this process.

Consider, for example, the MS-DRG triad for heart failure and shock (MS-DRGs 291, 292, and 293). This most-frequent Medicare diagnosis represents 5 percent of total Medicare inpatient prospective payment system discharges nationwide. Data for this example were obtained from the FY08 final Medicare Provider Analysis and Review (MedPAR) file (see exhibit 1). Costs were calculated at the claim level using department-specific charge data for these claims applied to departmental cost-to-charge ratios from Medicare cost report data for each facility. The data are limited to short-term acute care facilities, and claims from outside the United States, distinct part units, and facilities with insufficient cost report data available were excluded.

Exhibit 1

exhibit-1-National Average Costs by Department for Heart Failure and Shock

Data on average cost per case by department can be used for comparing a hospital's average departmental costs with national averages to identify unexpected variances for this important diagnosis. As expected, the data disclose that most departments see a significant increase in cost for the higher acuity MS-DRG (291), with the exception of routine and special care beds(see exhibit 2). Of particular note is the dramatic jump in cost for end-stage renal disease (ESRD) services for MS-DRG 291. This is likely due to MS-DRG coding practices.

Exhibit 2

exhibit-2-Does Your Organization Have a Central Processing Office

The same cost information represented as a percentage of cost to total is useful in providing an at-a-glance view of where resources are flowing when comparing individual MS-DRGs of various relative weights that constitute diagnoses such as heart failure and shock (see exhibit 3).

Exhibit 3

exhibit-3-National Average Costs by Department for Heart Failure and Shock

This analysis was prepared by American Hospital Directory. For more information, contact William Shoemaker at

Publication Date: Monday, March 01, 2010

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