Prospective payments to hospitals: Should emergency admissions have higher rates?

Systematic variation in patient resource use can be a significant problem for a system based on diagnosis-related groups (DRG's) if this variation is not evenly distributed across hospitals. If certain hospitals routinely treat patients who require more services than average under DRG's, the long-run financial viability of these hospitals will be threatened. In this study, the authors examine whether patients who are admitted on an emergency or urgent basis represent an identifiable group of patients whose costs are systematically higher than those of electively admitted patients, controlling for DRG. Alternative approaches for incorporating admission status into a DRG payment system are developed and tested.