Diagnosis Related Group Costs in a Regulated Environment: A Note About Their Economic Interpretation

The availability of the Diagnosis Related Group (DRG) system for determining hospital costs in some European countries has encouraged its use in pharmacoeconomic evaluations. The DRG system was developed in the US to provide data for prospective payments for hospitals. However, the financing of hospitals in some European countries is still based on the so-called `global budget' approach. Therefore, results of pharmacoeconomic studies involving hospitals financed by the `global-budget' approach in which DRG costs have been used require careful consideration. The main points to consider are: 1. that most of the cost components constituting the DRGs are in fact charges fixed by the government. This cost-charge ratio varies significantly across different DRGs, altering economic consequences when cost-shifting between DRGs; 2. that there is rarely a perfect concordance between attributable cost (as proposed by the DRGs) and the definition of variable cost (as defined in economic evaluations); 3. from the Sickness Fund's point of view, the way DRGs could be interpreted is rather unclear: financing or bench-marking?; and 4. the perspective of DRG cost is a mixed patient-hospital perspective which is neither the societal nor the health insurance perspective generally used in pharmacoeconomic evaluations. In conclusion, the use of DRG costs is a major improvement for pharmacoeconomic evaluation. However, many hypotheses still need to be made in these studies, depending on the economic perspective of the study. Therefore, the results of pharmacoeconomic studies should be considered and discussed in line with the national financing system of the hospitals involved.