Case-Based Reimbursement for Psychiatric Hospital Care Lloyd
I. Sederer,
Susan
V. Eisen,
M.D. Ph.D.
Diana Dill, Ed.D. Mollie C. Grob, M.S.W. Michele L. Gougeon, M.S.S., M.Sc. Steven
M.
Mirin,
M.D.
A fixed-prepayment system (casebased reimbursement) for patients initially requiring hospital-level care was evaluated for one year through an arrangement between aprivate nonprofitpsychiatric hospital and a self-insured company desiring to provide psychiatric services to its employees. This clinical andfinancial experiment offered a means of containing costs while monitoring quality ofcare. A twogroup, case-control study was undertaken of treatment outcomes at discharge, patient satisfaction with hospital care, and service use andcosts during the program’s first year. Compared with costs for patients in the controlgroup, costs for those in the program were lower per patient and per admission; cumulative costs for patients requiring rehospitalization were also lower. However, costsfor outpatient servicesforpatients in the program were not calculated. Treatment outcomes andpatients’ satisfaction with hospital care were comparable for the two groups.
recent years (1-10). Capitation and prospective payment have placed providers of services at risk and have radically changed fiscal incentives. The clinical imperative of the 1990s will be to examine the impact of these changes on systems of care and retain only those systems that reduce costs in a clinically responsible manncr (11-16).
On
October
1,
1990,
McLean
Hospital began a case-based reimbursement project to provide care to employees ofa large self-insured conporation in the Boston area and the employees’ dependents. A commercia! insurance company acted as the third-party administrator. To our knowledge this project is the only arrangement in the United States in which a fixed yearly prepayment is made to a private provider for provision of services in major diagnostic categories (MDCs) 19 (mental disorders) and 20 (substance abuse) for employees or dependents requiring hospital care. In this paper we describe the project and present the results ofa study in which treatment outcome at discharge, patient sarisfaction with hospital care, and 5crvice use and costs during the program’s first year were evaluated.
with Street, Belmont, Massachusetts 02178, and the department of psychiatry at Harvard Medical SchooL
Project development McLean Hospital is a private not-forprofit psychiatric center with extensive inpatient, partial hospital, outpatient, and community residence services; it is a major teaching hospitat of the Harvard Medical School. The company that acts as a thirdpanty administrator, representing the self-insured corporation, approached McLean Hospital in 1990 with a proposal that together we develop a case-based reimbursement system in which a fixed prepayment would constrain the unbridled in-
1120
November
Important innovations in health financing and delivery vices have been implemented
The
McLean
authors
Hospital,
are
affiliated 1 1 5 Mill
mental of senin
1992
VoL 43
No.
11
demnity costs that the self-insured corporation was experiencing. Using 1989 as the index year, we analyzed the utilization of the hospital’s services by employees of the company and the employees’ dependents, including inpatient, outpatient, ancillary, and professional senvices. We found that costs for services varied least within age groups (under age 1 3, 13 to 18, 19 to 24, 25 to 55, and over age 55) and within MDC 19 or MDC 20 groups. Therefore we established reimbursement rates based on age and MDC group rather than on particular diagnoses. We estimated that during the first year of the contract at least 50 patients would require approximately 60 episodes ofhospital care. All patients admitted to the hospita! had to be approved by an mdcpendent utilization review company and were covered by indemnity, per diem payment for a specific number of hospital days (on their equivalent)-rcfcrred to as the inlier numben-which varied by age and MDC category (range=fivc to 18 days). At this point a lump-sum case-based rate became operational and obligated McLean to provide, for a fixed sum, inpatient, ancillary (diagnostics and pharmacy), partial hospital, and community residence care to each patient as medically necessary. We established a limit to the number of days of care-referred to as the outlier number-which varied by age and MDC category (nange=42 to 1 50
days).
However,
it was
set
very
high so that the hospital was held signfficant financial risk. Inpatient-day equivalents for tennative, noninpatient care such partial hospitalization and halfwayhouse services were set at ratios 2:1,3:1,and4:1 basedonthelevelof
Hospital
and
Community
Psychiatry
at atas of
intensity and cost of the service. inpatient professional services as psychiatric, psychotherapeutic, medical, and neurological care
included
in the case-based
No such
rate,
were a!-
though these may be added to a future contract. Professional fees were charged in a traditional fee-fon-senvice manner. Outpatient care was not included in the arrangement and was covered by the company’s customary
outpatient benefits. Patients were free to choose where they were hospitalized on rehospitalized. All patients who needed nehospitalization, however, returned to McLean Hospital. The contract patients were adr
mitted to a limited number hospital’s inpatient units. psychiatrists and psychologists
of the Specific were
selected
patients.
to care for contract
Limiting units and professional providers enabled us to better monitor and manage the care ofthesc patients. The following example, using simplified rates, illustrates the casebased reimbursement mechanism. A
50-year-old
man
with
a psychiatric
the inlicn number diagnostic
already
for the patient’
age
category-the
reimbursed
$12
would
be cred-
ited to the total case-based rate of $50, which reflects the patient’s age and MDC category. The $50 would then cover changes for inpatient services (including pharmacy and labo-
natory services), partial hospitatization, and community residence care until the patient had accumulated 1 50 inpatient days or their equivalent (the outlier number). Ifthe patient continued to require hospital-level
95 cents
cane,
would
a pen
diem
rate
of
be paid, but only for
Evaluation
Hospital
and
Community
the effect on treatment satisfaction
Psychiatry
characteristics (contract)
of
of 33 psychiatric inpatients in a case-based 29 inpatients not in the program (control)
and
Contract Characteristic
reimburse-
Control
N
%
N
%
20 13
61
17
59
39
12
41
7 9 17
21 27 51
4 7 17
14 25 61
Gender
Female Male
Work status, past month Fulltime Parttime Not working Student status, past month
6
18
11
38
27
82
18
62
Single
14
42
25
86
Married Separated,
11
33
1
3
8
24
3
10
Inschool
Not Marital
in school status1
widowed, or divorced Living situation With parents With spouse or children2 Independent Other 1
X2=13.51,
df=2,
p< .002,
for
comparison
between
X2=9.51,
with
21
7
24
39
10 3
30 9
2 14
7 48
6
21
and single
con-
contract
married
patients
df=3, p
I. Sederer,
Susan
V. Eisen,
M.D. Ph.D.
Diana Dill, Ed.D. Mollie C. Grob, M.S.W. Michele L. Gougeon, M.S.S., M.Sc. Steven
M.
Mirin,
M.D.
A fixed-prepayment system (casebased reimbursement) for patients initially requiring hospital-level care was evaluated for one year through an arrangement between aprivate nonprofitpsychiatric hospital and a self-insured company desiring to provide psychiatric services to its employees. This clinical andfinancial experiment offered a means of containing costs while monitoring quality ofcare. A twogroup, case-control study was undertaken of treatment outcomes at discharge, patient satisfaction with hospital care, and service use andcosts during the program’s first year. Compared with costs for patients in the controlgroup, costs for those in the program were lower per patient and per admission; cumulative costs for patients requiring rehospitalization were also lower. However, costsfor outpatient servicesforpatients in the program were not calculated. Treatment outcomes andpatients’ satisfaction with hospital care were comparable for the two groups.
recent years (1-10). Capitation and prospective payment have placed providers of services at risk and have radically changed fiscal incentives. The clinical imperative of the 1990s will be to examine the impact of these changes on systems of care and retain only those systems that reduce costs in a clinically responsible manncr (11-16).
On
October
1,
1990,
McLean
Hospital began a case-based reimbursement project to provide care to employees ofa large self-insured conporation in the Boston area and the employees’ dependents. A commercia! insurance company acted as the third-party administrator. To our knowledge this project is the only arrangement in the United States in which a fixed yearly prepayment is made to a private provider for provision of services in major diagnostic categories (MDCs) 19 (mental disorders) and 20 (substance abuse) for employees or dependents requiring hospital care. In this paper we describe the project and present the results ofa study in which treatment outcome at discharge, patient sarisfaction with hospital care, and 5crvice use and costs during the program’s first year were evaluated.
with Street, Belmont, Massachusetts 02178, and the department of psychiatry at Harvard Medical SchooL
Project development McLean Hospital is a private not-forprofit psychiatric center with extensive inpatient, partial hospital, outpatient, and community residence services; it is a major teaching hospitat of the Harvard Medical School. The company that acts as a thirdpanty administrator, representing the self-insured corporation, approached McLean Hospital in 1990 with a proposal that together we develop a case-based reimbursement system in which a fixed prepayment would constrain the unbridled in-
1120
November
Important innovations in health financing and delivery vices have been implemented
The
McLean
authors
Hospital,
are
affiliated 1 1 5 Mill
mental of senin
1992
VoL 43
No.
11
demnity costs that the self-insured corporation was experiencing. Using 1989 as the index year, we analyzed the utilization of the hospital’s services by employees of the company and the employees’ dependents, including inpatient, outpatient, ancillary, and professional senvices. We found that costs for services varied least within age groups (under age 1 3, 13 to 18, 19 to 24, 25 to 55, and over age 55) and within MDC 19 or MDC 20 groups. Therefore we established reimbursement rates based on age and MDC group rather than on particular diagnoses. We estimated that during the first year of the contract at least 50 patients would require approximately 60 episodes ofhospital care. All patients admitted to the hospita! had to be approved by an mdcpendent utilization review company and were covered by indemnity, per diem payment for a specific number of hospital days (on their equivalent)-rcfcrred to as the inlier numben-which varied by age and MDC category (range=fivc to 18 days). At this point a lump-sum case-based rate became operational and obligated McLean to provide, for a fixed sum, inpatient, ancillary (diagnostics and pharmacy), partial hospital, and community residence care to each patient as medically necessary. We established a limit to the number of days of care-referred to as the outlier number-which varied by age and MDC category (nange=42 to 1 50
days).
However,
it was
set
very
high so that the hospital was held signfficant financial risk. Inpatient-day equivalents for tennative, noninpatient care such partial hospitalization and halfwayhouse services were set at ratios 2:1,3:1,and4:1 basedonthelevelof
Hospital
and
Community
Psychiatry
at atas of
intensity and cost of the service. inpatient professional services as psychiatric, psychotherapeutic, medical, and neurological care
included
in the case-based
No such
rate,
were a!-
though these may be added to a future contract. Professional fees were charged in a traditional fee-fon-senvice manner. Outpatient care was not included in the arrangement and was covered by the company’s customary
outpatient benefits. Patients were free to choose where they were hospitalized on rehospitalized. All patients who needed nehospitalization, however, returned to McLean Hospital. The contract patients were adr
mitted to a limited number hospital’s inpatient units. psychiatrists and psychologists
of the Specific were
selected
patients.
to care for contract
Limiting units and professional providers enabled us to better monitor and manage the care ofthesc patients. The following example, using simplified rates, illustrates the casebased reimbursement mechanism. A
50-year-old
man
with
a psychiatric
the inlicn number diagnostic
already
for the patient’
age
category-the
reimbursed
$12
would
be cred-
ited to the total case-based rate of $50, which reflects the patient’s age and MDC category. The $50 would then cover changes for inpatient services (including pharmacy and labo-
natory services), partial hospitatization, and community residence care until the patient had accumulated 1 50 inpatient days or their equivalent (the outlier number). Ifthe patient continued to require hospital-level
95 cents
cane,
would
a pen
diem
rate
of
be paid, but only for
Evaluation
Hospital
and
Community
the effect on treatment satisfaction
Psychiatry
characteristics (contract)
of
of 33 psychiatric inpatients in a case-based 29 inpatients not in the program (control)
and
Contract Characteristic
reimburse-
Control
N
%
N
%
20 13
61
17
59
39
12
41
7 9 17
21 27 51
4 7 17
14 25 61
Gender
Female Male
Work status, past month Fulltime Parttime Not working Student status, past month
6
18
11
38
27
82
18
62
Single
14
42
25
86
Married Separated,
11
33
1
3
8
24
3
10
Inschool
Not Marital
in school status1
widowed, or divorced Living situation With parents With spouse or children2 Independent Other 1
X2=13.51,
df=2,
p< .002,
for
comparison
between
X2=9.51,
with
21
7
24
39
10 3
30 9
2 14
7 48
6
21
and single
con-
contract
married
patients
df=3, p
