Performance Differences between the Episode-Based DBC and Diagnosis-Related DRG Case Mix Systems

Krabbe-Alkemade, Y., & Groot, T. (2017). Performance differences between the episode-based DBC and diagnosis-related DRG case mix systems. Maandblad Accountancy en Bedrijfseconomie, 91(7/8), 224-235.

12 Pages Posted: 19 Sep 2017

See all articles by Tom Groot

Tom Groot

VU University Amsterdam - Amsterdam Research Center in Accounting

Y. Krabbe-Alkemade

VU Amsterdam

Date Written: July 14, 2017

Abstract

This paper explores the question how much detail a cost system needs to have in order to provide reliable cost information at a reasonable price. In general, fine-grained cost systems with a lot of detail (in product definition, in cost drivers and in cost pools) are expected to provide more reliable cost information than coarse-grained cost systems with less detail. This paper takes as an example the DBC cost system that has been developed for the Dutch hospital sector. The fine-grained DBC system with over 40,000 health care products appears to outperform lower-grained DRG systems with “only” 15,000 and 6,000 health care products on cost homogeneity and predictive validity. It does so however at the cost of a high number of products with measurement and specification errors, caused by a large number of outliers and by a low number of observations in product groups. The cost-effectiveness of the DBC system is not very high: only 3% of all DBC-codes explains 80% of total costs, whereas the lower-grained DRG system uses 14% of the codes to explain 80% of total costs. Combined with the high administration cost of the DBC-system, it was from an economic perspective, a sensible idea to replace the fine-grained DBC-system by the coarse-grained DOT system.

Keywords: DRG, DBC, hospital, diagnosis-related groups, cost system, cost system granularity

JEL Classification: M41, I18

Suggested Citation

Groot, Tom and Krabbe-Alkemade, Yvonne, Performance Differences between the Episode-Based DBC and Diagnosis-Related DRG Case Mix Systems (July 14, 2017). Krabbe-Alkemade, Y., & Groot, T. (2017). Performance differences between the episode-based DBC and diagnosis-related DRG case mix systems. Maandblad Accountancy en Bedrijfseconomie, 91(7/8), 224-235. , Available at SSRN: https://ssrn.com/abstract=3038415

Tom Groot (Contact Author)

VU University Amsterdam - Amsterdam Research Center in Accounting ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Yvonne Krabbe-Alkemade

VU Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands
+31205986040 (Phone)

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