PEDIATRICS Vol. 77 No. 5 May 1986, pp. 627-632
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Impact of Selected Diagnosis-Related Groups on Regional Neonatal Care

Ronald J. Lagoe PhD1, John W. Milliren PhD1, and Marilyn J. Baader RN, MS1

1 From the Hospital Executive Council and Crouse Irving Memorial Hospital, Syracuse; and New York State Office of Health Systems Management, Albany

The evaluation and reimbursement of hospital use by means of diagnosis-related groups (DRGs) may have a major impact on the utilization of regional neonatal care. Medicare has already implemented the DRG system and other payors, including Medicaid, Blue Cross, and commercial insurance, are also considering adopting it. Under this approach, neonates are assigned to one of seven DRGs, each of which is reimbursed at a relatively fixed rate. An evaluation of hospital utilization by neonates focused on three of these DRGs in four regional neonatal systems located in Upstate New York. Calendar year 1983 data indicated that Level III, II, and I neonatal facilities generated substantially different mean stays for these DRGs in the four regions. The ranges of mean stays between Level III and Level I facilities were greatest for DRGs involving neonates who died or were transferred and those with extreme immaturity and/or respiratory distress syndrome. Federal length of stay and cost standards for these categories failed to address the different utilization experience of these levels of care. The analysis suggests that, as additional payors adopt DRGs, the standards relating to neonatal care must be modified.

Key Words: neonatology • reimbursement mechanism • regional medical program • hospitalization

Submitted on July 5, 1985
Accepted on August 12, 1985