The 2010 expansion of activity-based hospital payment in Israel: an evaluation of effects at the ward level

Abstract

Background In 2010, Israel intensified its adoption of Procedure-Related Group (PRG) based hospital payments, a local version of DRG (Diagnosis-related group). PRGs were created for certain procedures by clinical fields such as urology, orthopedics, and ophthalmology. Non-procedural hospitalizations and other specific procedures continued to be paid for as per-diems (PD). Whether this payment reform affected inpatient activities, measured by the number of discharges and average length of stay (ALoS), is unclear. Methods We analyzed inpatient data provided by the Ministry of Health from all 29 public hospitals in Israel. Our observations were hospital wards for the years 2008–2015, as proxies to clinical fields. We investigated the impact of this reform at the ward level using difference-in-differences analyses among procedural wards. Those for which PRG codes were created were treatment wards, other procedural wards served as controls. We further refined the analysis of effects on each ward separately. Results Discharges increased more in the wards that were part of the control group than in the treatment wards as a group. However, a refined analysis of each treated ward separately reveals that discharges increased in some, but decreased in other wards. ALoS decreased more in treatment wards. Difference-in-differences results could not suggest causality between the PRG payment reform and changes in inpatient activity. Conclusions Factors that may have hampered the effects of the reform are inadequate pricing of procedures, conflicting incentives created by other co-existing hospital-payment components, such as caps and retrospective subsidies, and the lack of resources to increase productivity. Payment reforms for health providers such as hospitals need to take into consideration the entire provider market, available resources, other – potentially conflicting – payment components, and the various parties involved and their interests.

Effects of Activity-Based Hospital Payments in Israel: A Qualitative Evaluation Focusing on the Perspectives of Hospital Managers and Physicians

“…10 Recent studies have shown that hospitals in different countries react differently to the adoption of DRGs and subsequent changes in prices. For example, in Israel the introduction of PRGs had no significant impact on ALoS and volumes of care at the ward (aggregate) level, 9 but in England volumes of care increased and ALoS decreased slightly. 30,31 In Italy, volumes of care increased for surgical but not for medical patients 32 while in Norway, volumes of care increased for medical but not for surgical patients.…”

“…The second is negotiations between HPs and hospitals that can set alternative reimbursement contracts, which supplant the official cap, and entail discounts that vary across HPs and hospitals. 5,9 Usually small hospitals or those located in areas with high density of hospitals give more discounts to HPs in order to attract them to refer patients. 8 Elective procedures performed in after-hours are paid PRG, and each hospital can decide whether to work in after-hours and what procedures to perform.…”

“…Shmueli and colleagues 15 explored the short-term effects of the early adoption of PRGs for 5 procedures in 4 hospitals in 1990 and found decreases in LoS but no clear trend in changes of volumes and quality of care. Waitzberg et al 9 examined the short and long-term effects of the later expansion of PRG payments in 2010-2014, and found no significant impact on ALoS or number of discharges when analyzed at the ward level.…”

Temporal trends in healthcare resource utilization and costs following acute myocardial infarction

“…Our findings should be discussed considering several important characteristics of the Israeli health care system. Israel has a national health insurance financed predominantly via progressive taxation and includes four competing, non-profit health plans (HPs) which provide a broad package of services determined by the government [27,28]. The HPs provide care in the community and purchase hospital services for their members.…”

“…Israeli Arabs) it could be insufficient resulting in excessive use of hospital services. The occupancy rates of Israeli hospitals is one of the highest among the Organization for Economic Co-operation and Development (OECD) countries (greater than 90%) while the length of stay is one of the shortest (around 4 days) [27,28]. Furthermore, hospital pricing system is considered outdated and limits their reimbursement while pricing of novel procedures and technologies and rising.…”