Journal of Service Science and Management, 2013, 6, 283-292
Published Online December 2013 (
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged
Charging Based on the Diagnosis-Related Group (DRG) in
the Proposed Healthcare Reform
Fiona Y. Y. Wong*, Frank W. K. Chan, Su Liu
The Jockey Club School of Public Health and Primary Care, The Chinese University of Hong Kong, Hong Kong, China.
Email: *,,
Received November 7th, 2013; revised December 5th, 2013; accepted December 26th, 2013
Copyright © 2013 Fiona Y. Y. Wong et al. This is an open access article distributed under the Creative Commons Attribution Li-
cense, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. In
accordance of the Creative Commons Attribution License all Copyrights © 2013 are reserved for SCIRP and the owner of the intel-
lectual property Fiona Y. Y. Wong et al. All Copyright © 2013 are guarded by law and by SCIRP as a guardian.
The second stage consultation of healthcare reform in Hong Kong was launched in late 2010. One of the key features in
the healthcare reform is the use of packaged charging based on Diagnosis-Related Group (DRG) structure, for reim-
bursement of medical fees in order to enhance cost certainty and transparency in private healthcare services. The objec-
tive of the study was to investigate the comments, concerns and suggestions of medical practitioners and private hospi-
tals about medical pricing based on DRG. A survey completed by 1100 medical practitioners, seven focus groups with
42 medical practitioners and six hospital administrators participated was conducted. Generally, the participants believed
that DRG was more applicable to straight-forward and one-off treatment procedures. Those working in the private sec-
tor and non-Family Medicine specialists were more concerned about the desirability and feasibility of DRG, and the
potential of control of pricing in private market. The practice of DRG-based pricing method in certain specialties and
cases which required multiple examinations and procedures for diagnosis were discussed. Concerns about doctors’
selection of cases, upcoding and gaming on the charging system, as well as the high administration cost were also
Keywords: Diagnosis-Related Group; Hospital Charges; Prospective Payment; Healthcare Reform
1. Introduction
The Hong Kong healthcare system is a dual system. It
has a public sector and a private sector. Around 70% of
outpatient care and primary care are provided largely by
private sector and 78% of specialist and inpatient second-
dary and tertiary care are delivered through the public
sector [1]. Healthcare services in the public sector are
heavily subsidized by the government. 97% of in-patient
services in public hospitals are subsidized by the gov-
ernment [2]. With the growing demand of health services
as a result of aging population, advancement of medical
technology and rising medical costs, the existing health-
care system and delivery models need to be reformed in
order to meet people’s needs.
The current healthcare reform in Hong Kong was first
launched in 2008 of which improvements and resources
had been invested in public healthcare services, health-
care infrastructure and safety net [3]. In October 2010,
the second stage consultation of the healthcare reform
was launched with a Health Protection Scheme (HPS)
formulated [4]. The HPS is a voluntary and supplemen-
tary healthcare financing scheme regulated by the gov-
ernment. It aims to ease the pressure on the public health-
care system by encouraging more people to use private
healthcare on a sustained basis. One of the key features
of the HPS is the use of packaged charging based on the
Diagnosis-Related Group (DRG) structure, for reim-
bursement of medical fees. The government believed that
the packaged charging system would enhance cost cer-
tainty and transparency to consumers in using private
healthcare services. However, the perspectives of general
practitioners and specialists, especially those working in
*Corresponding author.
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
the private sector, are not clear.
The design and development of the original DRG be-
gan in the late 60s in the US [5]. In 1983 Congress
started to enact a DRG based prospective payment sys-
tem (PPS) for all Medicare patients. Later, a number of
states and large payers also implemented DRG based
hospital PPS for non-Medicare patients. The concept of
DRG is to group patients into categories with homoge-
neous resource consumptions and similar clinical char-
acteristics. DRG provides prospective payment based on
the average cost of patients regardless of the actual costs
in managing a patient within a DRG [6]. Patients are
generally classified based on clinical data (diagnoses and
procedures), demographics (gender and age), and re-
source consumption (length of stay and other costs). The
DRG concept has also been adopted in Australia, Europe
and Asia countries for reimbursement of inpatient care,
healthcare financing and hospital management [7]. It is
expected that DRG can strengthen the capacity for effec-
tive management, create strong incentives for discourag-
ing unneeded services and improve the quality of medi-
cal care [8,9]. However, concerns on the impact of DRG
on the quality of healthcare services have been raised in
countries implementing DRG. Some specialties, for ex-
ample, dermatology, and cases involving advanced and
evolving therapeutics modalities or multiple procedures,
could be underpaid if reimbursed by DRG [8]. In the US,
for example, the new technology add-on payment policy
is used to provide additional payments for cases with
high costs involving eligible new technologies [10]. If
the actual costs of the new technology case exceed the
DRG payment by more than the estimated costs of the
new technology, Medicare payment will be limited to the
DRG payment plus 50% of the estimated costs of the
new technology. In such circumstances, case selection of
healthcare providers can happen, and patients with com-
plicated health conditions may be rejected for treatment
[8,11]. Other concerns, such as the quality of coding like
the completeness of the coding system in capturing all
the diagnoses and procedures, correctness in reflecting
the diagnoses and treatment, and ensuring the codes, up
to date have also been raised [12]. The principal diagno-
sis can be any condition present at admission that re-
quires a hospital stay and further treatment. Moreover, to
maximize reimbursement, patients may be assigned with
hospital discharge diagnostic codes in a way that would
increase payment to hospitals [13,14]. Some hospitals are
also suspected to pre-discharge patients in order to con-
trol patients’ length of stay [15].
In Hong Kong, the government proposed a govern-
ment-regulated, voluntary HPS using packaged charging
based on DRG for reimbursement of medical fees in its
future healthcare reform. However, the specific DRG
design is largely unknown, so are the perspectives of
service providers. As secondary and tertiary health ser-
vices are primarily delivered by the public sector, pro-
viders in the public and private sectors may have differ-
ent concerns or their concerns could be different from
those raised in other countries. The objective of this
study was to investigate the comments, concerns and
suggestions of medical practitioners and private hospitals
about medical pricing based on DRG.
2. Methodology
There were two phases in the study using both quantita-
tive and qualitative approaches. The first phase was a
survey and the second phase was a focus group discus-
sion. The survey helped understanding the general per-
spectives of the medication practitioners while in the
focus group discussion, the rationales and reasons behind
were investigated in depth.
2.1. Procedures
The survey was sent to all western medical practitioners
listed in the up-to-date registration obtained from the
Medical Council of Hong Kong on 23 December, 2010.
In total, questionnaires were mailed to 11,890 doctors,
whose names were listed in full registration (resident list
only), limited registration, or specialist registration. Doc-
tors with limited registration possess qualifications out-
side Hong Kong and they may teach, conduct research
and/or perform hospital work only. Those with specialist
registration have been awarded a Fellowship of the Hong
Kong Academy of Medicine (HKAM) or certified by the
HKAM that they have achieved a professional standard
comparable to that recognized by the HKAM for the
award of its fellowship. Registered medical practitioners
who were non-residents, with provisional registration and
temporary registration were excluded. A cover letter ex-
plaining the purpose of the study and an assurance of
confidentiality was enclosed with the questionnaire, to-
gether with a prepaid, self-addressed envelope to facili-
tate reply of the completed questionnaire. Reminder let-
ter and a copy of the questionnaire were first sent to
those who had not responded after 14 days. A second
reminder was sent out after another two weeks, followed
by a telephone reminder to those with contact numbers
available on the Hong Kong Doctors website
(, maintained by the Hong Kong
Medical Association.
For the focus group discussion, seven homogenous
focus groups with nine residents working in public sector
(1 group), eight academics/college fellows (1 group), six
private hospital residents (1 group), six private general
practitioners (1 group), ten private specialists (2 groups),
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
and six private hospital administrators (1 group) were
formed. Participants were recruited by the snowball sam-
pling method and professional network. Doctors who
indicated in the survey that they were interested to par-
ticipate in the focus group discussion were also invited.
A few days before each focus group, a stimulus was
sent to the participants. At the beginning of each focus
group discussion, the purpose and procedures of the fo-
cus group were explained and the written informed con-
sent was obtained from each of the participants. The
moderator led the discussion based on a semi-structured
discussion guide. The participants were encouraged to
express their views freely. Addition to the focus groups,
three in-depth telephone interviews with private special-
ists were also conducted because they were unable to
attend the private specialist focus groups. Proceedings
were audio-recorded and transcribed verbatim.
2.2. Instruments
The questionnaire comprised two questions on the aware-
ness about the HPS and the ongoing healthcare reform,
four questions on the DRG-based charging in the HPS
and, eight questions on demographic and practice-related
details of respondents. A brief description of DRG-based
charging was also enclosed for the reference of the re-
For the focus group discussions, a stimulus with back-
ground information on the health protection scheme, di-
agnosis-related groups, and a semi-structured discussion
guide were prepared to facilitate the focus group discus-
sions. The semi-structured discussion guide consisted of
open ended questions focusing on views of the impact of
DRG-based charging, feasibility of DRG-based charging,
and alternative measures and opinions that can better
enable the HPS to function effectively. The stimulus and
discussion guide were pilot tested and refined before
conducting the main focus groups.
2.3. Data Analysis
SPSS (Statistical Package for the Social Sciences Soft-
ware) was used for data analysis. Demographic and prac-
tice-related details in the survey were analyzed using
descriptive statistics. Measures on DRG-based charging
were cross-tabulated with independent background vari-
ables. Statistically significant level was 5%.
A five-stage data analysis in framework approach was
used in the analysis of the focus group discussions: Fa-
miliarization, Identifying a thematic framework, Index-
ing, Charting, and Mapping and interpretation [16]. The
transcripts were analyzed independently by two investi-
gators using the NVivo 7 software (QSR International
Pty. Ltd. ©1999-2006). Broad themes were first identi-
fied. Each theme was assigned to a topic category based
on its content. Categories were further divided into sub-
categories where appropriate, creating a tree-diagram.
The two investigators discussed and examined the tran-
scripts for connections among these themes until con-
sensus was reached. The master framework was applied
to all the transcripts. Interpretations of the themes were
illustrated by extracts from the transcripts.
2.4. Ethical Consideration
This study was approved by the Ethics Committees of the
Faculty of Medicine, The Chinese University of Hong
Kong. The study was performed in accordance with the
World Medical Association’s Declaration of Helsinki.
3. Results
3.1. The Survey
A total of 1100 surveys were completed. 72.5% of the
respondents were male and 27.8% aged 41 - 50 years
(Table 1). 88.1% were working full-time, 46.3% were
working in public sector, followed by 44.4% working in
private clinics. Among those working in the private sec-
tor, the majority (69.3%) were solo practitioners. 65.4%
of the participants identified themselves as specialists,
including 5.8% in family medicine. The majority (76.5%)
obtained their basic medical degree in Hong Kong.
Compared with the 2009 health manpower survey con-
ducted by the Department of Health of Hong Kong [17]
(which was a voluntary survey with a response rate of
69.8%), the demographic and other relevant profiles of
this survey respondents showed similar patterns.
3.1.1. Aware n e ss abou t the HPS and the Healthcare
Using a scale of 0 - 10 (0 = not aware or comprehend at
all, 5 = 50% of its content, and 10 = comprehend 100%
of its content), 994 respondents self-rated their knowl-
edge of the HPS and healthcare reform. Most respon-
dents (38%) rated 4 - 6 with a mean score of 4.7 and a
median of 5.0, which indicated that on average, they
comprehended slightly less than 50% of the content of
the HPS and healthcare reform.
3.1.2. Feasibility of DRG-Based Charging
50.7% of the respondents agreed that it is feasible for
healthcare services providers to set charges for common
treatments/procedures based on DRG. 27.7% were neu-
tral and 21.6% disagreed with the feasibility of DRG-
based charging (Table 2). Public non-Family Medicine
(non-FM) specialists agreed with the feasibility of DRG
the most (52.0%) followed by private GP and FM spe-
cialist (50.0%). Most of the opponents were from private
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
Table 1. Distribution of survey respondents, by demo-
graphics and key characteristics.
% of
Age (y)
30 or below 20.1%
31 - 40 14.1%
41 - 50 27.8%
51 - 60 18.9%
60 or above 19.2%
Male 72.5%
Female 27.5%
Full time 88.1%
Part time 7.1%
Not actively practicing 4.9%
Currently working in (multiple options allowed)*
Hospital Authority or government departments 46.3%
Private clinics (except those under private
healthcare organizations) 37.7%
Private clinics under private healthcare
organizations 6.7%
Private hospitals 9.8%
Universities 4.6%
Others 5.1%
Best describe your current job
(For those who are working in the private sector)
Engaged in group practice as partner 11.3%
Engaged in group practice as non-partner 13.3%
As solo practitioner in private sector 69.3%
As resident doctor in private hospital(s) 4.4%
Others 1.6%
Type of job (multiple options allowed)**
General practitioner 27.7%
Specialist in family medicine 5.8%
Specialist in clinical area 54.7%
Specialist in non-clinical area 4.9%
Others 8.2%
Basic medical degree obtained in
Hong Kong 76.5%
Overseas 18.9%
Mainland China 4.60%
Private GPs/FM Specialists 23.6%
Private Non-FM Specialists 24.7%
Public GPs/FM Specialists 8.3%
Public Non-FM Specialists 35.2%
Others 8.2%
Note: *9.3% respondents chose more than one option as their current work
place. **1.7% respondents chose more than one option to describe their type
of job.
Table 2. Feasibility of DRG-based charging
% of Respondents
Feasible for healthcare service
providers to set their charges for common
treatment/procedures based on DRG
Strongly agree
Strongly disagree
Percentage of hospital admissions and
ambulatory procedures in their work
feasible for DRG (n = 726)
1% - 24%
25% - 49%
50% - 74%
75% - 99%
non-FM specialists of which 31.5% disagreed with the
feasibility of DRG.
For the feasibility of applying DRG to hospital charges
alone, to doctor fees alone and to all charges (hospital
charges plus doctor fees), most of the respondents agreed
or strongly agreed DRG to be applied to hospital charges
alone (53.2%), followed by all charges (37.2%) and doc-
tor fees alone (29.0%). In other words, applying DRG to
doctors fees alone had the highest disagreement (42.8%),
followed by all charges (39.2%) and hospital charges
alone (23.1%). Among different types of doctors, public
non-FM specialists had the highest agreement rate to all
the three implementation options (hospital charges:
56.9%; doctor fees: 31.2%; all charges: 40.2%) while
private non-FM specialists had the highest disagreement
on the three implementation options (57.1%; 31.3%;
54.5%) (Table 3).
3.1.3. Hospital Admissions and Ambulatory
Procedures Feasible for DRG-Based Charging
Among 1074 respondents who responded to this question,
21.5% stated that their work did not involve hospital ad-
missions and ambulatory procedures and 10.9% did not
know. Among the remaining 726 respondents, 33.9%
stated that at least 50% of their cases were feasible to
DRG-based charging (Table 2). Generally, the DRG was
more feasible to cases of the non-FM specialists, 45.1%
of those worked in public sector stated that 50% - 100%
of their cases were feasible to DRG, followed by 37.3%
of those worked in private sector (Table 4).
3.2. Focus Group
A total of 48 medical doctors, including six private hos-
pital administrators participated in the focus groups. The
majority (72.9%) were male and 80.5% of the medical
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
Table 3. Analysis on feasibility of DRG on three different
implementations across different workplace/specialty.
1. All Changes (hospital charges plus doctor fees) (N = 1047)
Private GPs/FM Specialists 38.0% 23.3% 38.8%
Private Non-FM Specialists 30.4% 15.2% 54.5%
Public GPs/FM Specialists 35.2% 31.8% 33.0%
Public Non-FM Specialists 40.2% 24.8% 35.0%
Others 36.0% 34.9% 29.1%
2. Hospital charges alone (except doctor fees) (N = 991)
Private GPs/FM Specialists 49.8% 25.8% 24.4%
Private Non-FM Specialists 51.4% 17.3% 31.3%
Public GPs/FM Specialists 55.3% 25.9% 18.8%
Public Non-FM Specialists 56.9% 23.7% 19.4%
Others 50.0% 34.1% 15.9%
3. Doctor fees alone (N = 987)
Private GPs/FM Specialists 29.0% 30.8% 40.2%
Private Non-FM Specialists 26.3% 16.6% 57.1%
Public GPs/FM Specialists 29.4% 36.5% 34.1%
Public Non-FM Specialists 31.2% 28.9% 39.8%
Others 25.6% 43.9% 30.5%
Table 4. Analysis of feasibility to DRG to their work across
different workplace/ specialty.
0% - 49%
of cases
50% - 100%
of cases
Not applicable
to my
Private GPs/FM Specialists 37.7% 20.9% 41.4%
Private Non-FM Specialists 48.6% 37.3% 14.1%
Public GPs/FM Specialists 31.0% 26.4% 42.5%
Public Non-FM Specialists 26.2% 45.1% 28.6%
Others 17.4% 26.7% 55.8%
doctors obtained their basic medical degree in Hong
Kong. Most of them were in the specialty of medicine
(18.8%) and surgery (10.4%), while 18.8% were general
practitioners. The majority (64.6%) were working in the
private sector, 45.7% had relevant working experience of
21 years or more (Table 5).
Most of the participants considered that the objective
of the HPS to increase price transparency on the private
healthcare market was important. However, views were
divided regarding whether and how far the promotion of
DRG-based charging method was the suitable means to
achieve the desired end. The discussion was analyzed by
the desirability and feasibility perspectives.
Table 5. Demographics and characteristics of focus group
N = 48
n (%)
35 (72.9%)
13 (27.1%)
Family Medicine
Community Medicine
Accident & Emergency
Ear, Nose & Throat
Obstetrics & Gynecology
Plastic Surgery
General Practitioner
Hospital Administrator
9 (18.8%)
2 (4.2%)
2 (4.2%)
2 (4.2%)
1 (2.1%)
1 (2.1%)
5 (10.4%)
1 (2.1%)
2 (4.2%)
4 (8.3%)
1 (2.1%)
1 (2.1%)
1 (2.1%)
1 (2.1%)
9 (18.8%)
6 (12.5%)
Working Unit (Multiple Options Allowed)
Hospital Authority (HA)
Private Hospital
Private Clinic
Private Clinic Under Private Healthcare Organization
Insurance Company
Other Statutory Board and Physical Committee
11 (22.9%)
15 (31.3%)
12 (25.0%)
6 (12.5%)
8 (16.7%)
1 (2.1%)
1 (2.1%)
Number of Years of Practice (n = 46)
1 - 5
6 - 10
11 - 15
16 - 20
1 (2.2%)
4 (8.7%)
9 (19.6%)
11 (23.9%)
21 (45.7%)
Place Where Medical Degree Obtained (n = 41)
Hong Kong
Not applicable for Hospital Administrator
33 (80.5%)
8 (19.5%)
3.2.1. Desirability
Some participants thought that the adoption of DRG as
the basis to charge patients for hospitalization and ambu-
latory procedures was in the right direction to increase
price transparency and contain medical cost increase in
the private healthcare market. They expected that DRG-
based charging method would enable the patients to have
a better prediction of the expenditure amount needed
(and the amount of reimbursement and co-payment if
they were insured). There was also an expectation that
DRG would foster competitiveness of the private health-
care market in the long run.
I think this is favourable for patients as (price) trans
parency will be increased. Right now there are many
criticisms on the lack of a ceiling price for medical fee. It
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
is all up to the doctors to charge…” (Academics)
If the charge is fixed and all-inclu sive, the patient ca n
be better prepared in advance about the budget while
hospital billing also becomes easier.” (Hospital admini-
However, some participants objected to the promotion
of DRG-based charging method in the private healthcare
market because it was based on the misperception that
the market was lack of transparency. They considered
private healthcare charges reasonably transparent nowa-
days as the private hospital bills set out the charges by
service items clearly. They also believed that price
transparency could not lead to better medical cost con-
tainment. They thought that price setting should be left to
free market to determine as in the case of other comer-
cial activities.
I definitely do not accept packaged pricing... The
current charging practice is extremely transparent
When we ask the private hospitals about their charges,
they can provide detailed breakdown by service item as
fine as the charges for each meal, each injection and
each medication, etc.” (Private GP)
As far as transparency and competitiveness are con-
cerned, DRG does not necessarily fare better than item-
ized charging if the latter is done properly.” (Private
3.2.2. Feasibility
Generally, the participants believed that the implementa-
tion of DRG-based charging method would be techni-
cally challenging in practice and might involve complex
issues to resolve, including assignment of DRG codes,
applicability to complicated and uncertain cases and
price setting mechanism.
1) Assignment of DRG codes
It was common that a patient presented with symptoms
rather than a diagnosis before hospital admissions or
ambulatory procedures. A single symptom might be the
manifestation from an ailment disease to a serious condi-
tion. The participants believed that it would also be a
challenge to use DRG codes on cases with multiple com-
plications or comorbid conditions. Most of the time, pa-
tients might require a series of investigations before the
diagnosis could be ascertained. Under these circum-
stances, the DRG code and hence the corresponding
packaged charges might not be made known to the pa-
tients in the early instance, or only a rough estimation of
medical charges could be provided to patients. As one of
the objectives of the government to implement the DRG
based charging is to increase the transparency of medical
charges, some of the participants, especially the private
specialists, doubted if this could be achieved.
A case with glaucoma may turn out to have macular
degeneration as well, and thus requires more treatments
and procedures. Some cases are not that straight for-
ward.” (Private hospita l specialist)
It would be problematic to charge medical fees based
on diagnosis. For example, stomach ache can be purely
stomach ache, or it can be due to pneumonia or other
problems Medical fees in most countries are on pro-
cedure basisThere is no regulation of doctors fees,
though a reference price may be provided.” (Private spe-
2) Coding of complicated and clinical uncertain cases
It was commonly agreed that DRG-based charging
was more applicable to simple, straight-forward and
one-off treatment procedures. Although the principle of
DRG is to set an average price for payment and reim-
bursement of medical cost, some participants raised their
concerns about the actual practice of DRG-based charg-
ing as the resources for and cost of treatment could vary
widely from one case to another. For some specialties
like psychiatry, some of the participants believed that
DRG-based charging might not be feasible. A relatively
simple diagnosis might evolve into one with greater
complication and co-morbidity during the course of hos-
pitalization. Therefore, the participants expected that the
future DRG coding system would be very refined so as to
benchmark the charges for complicated and co-morbid
cases appropriately.
“…For a straight forward operation, charging the
same price for all cases is not an issue as long as the cost
varies within a certain range. This spirit is acceptable
under su ch a condition ...” (Private specialist)
For certain complicated diseases, chronic illnesses or
cases with evolving complications, DRG is not feasible
unless we adopt a complex set of DRG coding. It was
once used in the United States, but it was infeasible for
mental illness.” (Private specialist)
3) Price setting mechanism
Participants were concerned about the criteria and
mechanism used in determining the price of each DRG
codes as patient heterogeneity is an important concern.
The difference in age and health status could require dif-
ferent workloads in clinical management and hence sub-
stantial difference in the cost of care. Along with tech-
nological advancement, more choices of treatment at
different cost levels were available to match with differ-
ent patients’ health condition and budget, however, DRG
coding system might affect patients’ choice of treatment.
Because of the complexities inherent to the DRG coding
system and its application in a private market setting,
some participants anticipated that a lot of administrative
resources would have to be deployed to establish a robust
DRG-based coding system.
For example, two different methods can be used to
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
treat the same case, with one being more effective but
more expensive. Under DRG, I cannot use the more ex-
pensive method if it is not included in the coding. Th is
indirectly affects the choice of treatment.” (Public hospi-
tal resident)
We have to pay salaries for staffing, including the
accountants. You have to count administration cost to
arrive at the total cost of adopting DRG-based charg-
ing.” (Private specialist)
3.2.3. Other Factors Affecting the Feasibility of
DRG-Based Charging
Many participants revealed that factors like doctors’
choices of cases, quality of healthcare, and gaming on the
charging system, such as upcoding, could also affect the
feasibility of DRG-based charging method.
1) Doctorschoices of cases
If the DRG coding system could not adequately allow
for reasonable variation in cost associated with com-
plexities, patients’ health condition and other factors, it
might present a degree of financial risk that a private
doctor was unable to bear. In response, some doctors
might refuse to offer DRG-based pricing and decline
those patients who insisted on that, while some others
might only be willing to offer DRG-based charging se-
lectively to the cases that appeared to be simpler and
straight forward.
“…only uncomplicated surgeries will be performed.
This may result in some cases declined by (private) doc-
tors… No (private) hospitals will admit them… Doctors
may take up cases selectively.” (Public hospital resident )
2) Quality of healthcare
Although the DRG-based charging levels were not the
statutory ceilings, the private healthcare providers (in-
cluding hospitals and doctors) might strive to compete in
price and compromise on the quality of healthcare. For
instance, there might be lesser volume of services and
lower quality of medication and assessment within the
package for the sake of cost saving.
Private hospitals must strive to make profit. While
patients go to private ho spitals for the sake of treatments
and services of better quality, (with DRG) they may end
up receiving public-sector-type of service.” (Private hos-
pital resident)
The problem with using packaged pricing is that the
doctors may cut down on the investigation procedures.
Take appendicitis as an exa mple,… if the fee is limited to
HK$12,000 (US$ 1558), the doctor may tend not to do
MRI.”(Private specialist)
3) Gaming on the charging system
Some participants mentioned that even if the normal
charge for a case was less than the benchmark price level,
private healthcare providers could still charge up to the
benchmark or choose DRG code which reflects higher
level of complexity when the dividing line was blurred.
A further possibility was to discharge a patient from hos-
pital prematurely and re-admit him/her shortly afterwards
to justify a new episode and hence a new count of pack-
If you know the rules of this game, you will know
which code comes with a higher price and change the
diagnosis accordingly.” (Private hospital specialist)
If a doctor thinks that the cost of the case has ex-
ceeded the package charge, what will happen? The doc-
tor could discharge the patient and then re-admit
him/her, and the case would become a new admission
with a new DRG.” (Private GP)
3.2.4. Other Alternative Measures and Opinions
The participants also expressed their suggestions include-
ing, engaging medical stakeholders in developing the
DRG-based pricing system, separation of packaged price
for hospital and doctor services, and the issues in subsi-
dizing patients who had higher medical service utiliza-
I think that the group most vulnerable to the impact
of DRG was not consulted…No doctors have been in-
volved in doing this piece (public consultation docu-
ment).” (Private specialist)
I strongly think that hospital charge and doctors fee
should be separated in a package…First, the fees are
clear, and second, doctors can freely decide whether to
participate in the scheme on a case by case basis.” (Pri-
vate specialist)
“… if everyone has to pay a higher premium because
of packaged pricing to share out the cost, it is probably
not that fair to those patients with less complicated
problems.” (Private GP)
4. Discussion
In both survey and focus group discussions, the partici-
pants were provided with information on HPS and DRG-
based charging to help them to familiarize with the topics.
However, the participants could still have different levels
of understanding of DRG and prospective payment. The
participants generally agreed that the DRG-based medi-
cal charging method was considerable to the healthcare
system but had concerns on its feasibility. Most of the
participants considered that the objective of the HPS to
increase price transparency on the private healthcare
market was important. However, views were divided
among those working in public/academics and private
Medical practitioners who were non-FM specialists
working in the private sector and administrators from
private hospitals were relatively more concerned with
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
both the desirability and feasibility of DRG because the
DRG-based charging method was seen as a mechanism
to control the health services fees the private medical
practitioners charged their patients. They believed that
price setting in the private sector should be left to free
market as in the case of other commercial activities.
There is also evidence that competition in free market is
associated with improved clinical outcomes, reduced
costs and more efficient system in some settings [18,19].
Medical practitioners working in academic or public
sector were less affected as their income was not affected
by the DRG-based medical charging method, therefore,
both the findings of survey and focus group discussions
revealed that the DRG-based medical charging system
was more acceptable to them.
Because of the control of medical charging, the par-
ticipants anticipated that there could be some negative
impact on the accessibility of health services of patients.
Our participants expressed their concerns about doctors’
rejection of cases which were more complicated or those
which required multiple procedures to avoid underpaid
by DRG. Specialties like oncology and dermatology of
which advanced and evolving therapeutic technologies
are involved could also be underpaid by DRGs. Our par-
ticipants stated that this could involve problems of con-
taining cost by compromising on quality or pre-discharge
of patients. If this is the case, these patients may have
difficulties in accessing private healthcare services, and
the goal of the government in promoting HPS to improve
service quality and divert patients to the private sector
may not be achieved. Patients with complexities will then
need to seek services from the public hospitals. The bur-
den of the public sector will definitely increase which
will further worsen the existing financial and manpower
issues in the public sector.
Doctors and researchers of other countries also have
similar concerns as the participants in this study. In terms
of controlling medical cost, studies found that the length
of stay of patients with lower respiratory tract infection
in DRG hospitals was found to be significantly shorter
compared to fee-for-service hospitals [20] and women
with breast cancer were also treated with shorter LOS for
surgical therapy and chemotherapy [21]. Mortality analy-
ses following hospitalization have been found to be un-
affected by the introduction of DRG-based payment sys-
tem [22]. However, whether DRG effectively reduces
LOS without negatively affecting patient outcomes is
still a matter of controversy [23]. A study evaluating the
impact of DRG on the healthcare system in Germany
found that doctors tempted to reduce their services or
take action on early discharge and new admission in or-
der to avoid underpaid, which was also a main concern of
our participants [8]. Another study also reported a de-
crease of the quality of care as seen from the patient per-
spective, especially their experience of staff treatment,
after the implementation of DRG in two surgical clinics
[24]. Besides refusing complex patients as the partici-
pants mentioned, there is also a possibility that hospitals
with a more complex case mix will pass the costs associ-
ated with these complex patients to patients in lower cost
DRGs [6].
In the U.S., improper payment review entities have
been developed to prevent improper payments through
upcoding, resolve discharge disputes between beneficiary
and hospitals and to identify and measure other behaviors
related to improper payments [25]. Because of the com-
plexity of cases, and the necessity of monitoring and au-
diting the DRG coding, a mechanism or a system is also
essential in Hong Kong to audit claims for correct DRG
coding as well as prevent inappropriate behaviours such
as refusing patients or early discharge. The proposed
HPS in Hong Kong will implement a Health Insurance
Claims Arbitration Mechanism to handle disputes over
health insurance claims and audit claims for correct DRG
coding, but the details of operation were not known at the
time of the study.
Our participants also conveyed that the DRG-pricing
method was not applicable to all clinical cases. No matter
the participants were from public or private sector, spe-
cialists or non-specialists, they emphasized that cases
which were admitted with a single symptom but later
changed to a serious condition and those required a series
of investigations before a diagnosis could be ascertained,
were difficult to be assigned DRG codes. Therefore, if
the purpose of the government of using DRG is to allow
the patients to know the medical fees in advance and to
enhance the transparency of healthcare cost, this could be
difficult to achieve. Researchers have questioned whether
DRGs can adequately adjust for severity because when a
patient has multiple conditions, the sequence and choice
of the codes may not be reliable [26]. Factors such as
physical and cognitive impairment, poor nutrition, co-
morbidity as well as poly-pharmacy have to be consid-
ered when calculating resources use [27]. Some of the
participants also raised concerns about managing psychi-
atric patients. The Centers for Medicare and Medicaid
Services in the U.S. exempted psychiatric facilities from
DRG-based charging for over two decades. A study on
the implications of DRG for psychiatry found that there
was little commonality of in-patient resource use and
duration of stay among patients within a given psychiat-
ric DRG [28]. DRGs were identified as poor predictors
of resource utilization in psychiatric cases which could
lead to inappropriate discharge of patients [29]. Until
2005, a new prospective payment system has been im-
plemented for inpatient psychiatry in the US [30]. If our
Open Access JSSM
Medical Stakeholders’ Views on the Use of Packaged Charging Based on the Diagnosis-Related
Group (DRG) in the Proposed Healthcare Reform
government plans to cover inpatient psychiatry in the
future, a very refined mechanism with adjustment factors
like age, day of stay, electroconvulsive therapy [31] has
to be set up to improve the accuracy for estimating the
medical payment of psychiatry cases in advance. As our
government has not yet provided any details on develop-
ing the DRG codes and the mechanisms for adjusting
patient and clinical factors, it is understandable that the
participants in the study perceived that DRG was more
applicable to simple, straight-forward and one-off treat-
ment procedures.
Time spent in administrative work as well as the ad-
ministrative cost was also raised in the focus groups.
Physicians in Germany had revealed their concerns of
additional workload for coding and paper work [32]. Es-
tablishing a robust DRG-based charging system is a dif-
ficult and complicated task. To reflect and induce desir-
able technological change, DRGs have to be updated
periodically. [33] Together with the arbitration mecha-
nism for handling disputes and monitoring claims men-
tioned previously, these will all lead to high administra-
tive cost. It was worried that if administration cost was
prohibitive, the HPS might not be financially sustainable.
5. Conclusion
This is the first study in our region to study the concerns
and perspectives of stakeholders from the medical sector
on the DRG-based charging method. Participants were
divided regarding the desirability and feasibility of DRG.
Doctors working in the private sector and non-FM spe-
cialists were more concerned about the potential of con-
trol of pricing in private market. As regards feasibility, it
would be technically challenging to practice DRG-based
pricing method in certain specialties and clinical prob-
lems, and cases which require multiple examinations and
procedures for diagnosis. The government should con-
sider engaging medical stakeholders in the development
of the DRG-based charging system, separation of pack-
aged price for hospital and doctor services, and develop
measures to minimize the equity issues in subsidizing
patients with higher medical service utilization. If the
government can carefully consider and tackle the techni-
cal concerns, it should be able to enhance the practicabil-
ity of carrying out the proposed DRG-based pricing
6. Acknowledgements
We would like to thank the Food and Health Bureau of
Hong Kong Special Administrative Region for support-
ing this study and all the medical practitioners and hos-
pital administrators who participated in the survey and
focus group discussion.
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