PEDIATRICS Vol. 78 No. 5 November 1986, pp. 829-836
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Alternative to Diagnosis-Related Groups for Newborn Intensive Care

Ciaran S. Phibbs MA1, Roderic H. Phibbs MD1, Jeffrey J. Pomerance MD, MPH1, and Ronald L. Williams PhD1

1 From the Department of Economics, University of California, San Diego; Department of Pediatrics and Cardiovascular Research Institute, University of California, San Francisco; Department of Pediatrics, Cedars-Sinai Medical Center and University of California, Los Angeles; and Community and Organization Research Institute, University of California, Santa Barbara

Clinical and billing data were collected on all admissions to six California newborn intensive care units during a 6-month period. Charges were adjusted to costs using Medicaid cost to charge ratios and for inflation, and patients were classified by the diagnosis-related group (DRG) system. Costs were from 97% to 708% more than the proposed DRG reimbursement levels. Regression analysis showed that DRGs explained 22% of the variation in costs. An alternative model using binary variables to control for birth weight, assisted ventilation, surgery, survival, multiple births, and mode of discharge explained 42% of the variation in costs. In contrast to other proposed DRG alternatives, this simple model does not require special training or subjective decision-making.

Key Words: diagnosis-related groups • newborn intensive care

Submitted on October 7, 1985
Accepted on March 4, 1986


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