Case-based payment systems for hospital funding in Asia : an investigation of current status and future directions

Overview

A number of middle-income countries in the Asia Pacific region are introducing or considering the implementation of Diagnosis-Related Groups (DRGs) as a method for managing hospital funding arrangements. DRGs come within a broader category of case-based or activity-based funding (ABF) arrangements that are used principally as a method for increasing the efficiency of hospital services. DRG-based hospital payment systems adopt a standard pricing framework that provides equality in payments across health-care providers for services of the same kind. Generally, DRGs are introduced to address the shortcomings of pre-existing fee-for-service (FFS) methods of hospital payment, which encourage an oversupply of services to increase revenue, and (in a few cases) fixed capitation payment systems, which have the perverse effect of reducing supply in order to reduce costs below the capitation level. DRGs, therefore, provide a technical means for the management and financing of public and/or private hospital services, and are often linked with social health insurance and government funding mechanisms.