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					                    Macedonian DRG Manual DRAFT

                    Republic of Macedonia
                      Ministry of Health


                    TECHNICAL ASSISTANCE



                   FOR DISCUSSION

                          November 2008

                         KAROL Consulting

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                                                Macedonian DRG Manual DRAFT


1.      CURRENT SITUATION IN MACEDONIA..............................................................................5
     1.1. Background ............................................................................................................................. 5
     1.2. DRG implementation .............................................................................................................. 5

2.      ISO-RESOURCE (EQUAL-RESOURCE) CLASSIFICATIONS............................................7
     2.1. Overview of classifications and measures .............................................................................. 7
        2.1.1. Clinical classifications .................................................................................................... 7
        2.1.2. Management measures.................................................................................................... 7
     2.2. Casemix classifications ........................................................................................................... 7

3.      THE EVOLUTION OF DRGS AND THE MAIN VARIANTS ...............................................9
     3.1. The history of DRGs ............................................................................................................... 9
     3.2. The general logic of all DRG variants .................................................................................. 11
     3.3. The main DRG variants ........................................................................................................ 14
        3.3.1. HCFA DRGs ................................................................................................................. 14
        3.3.2. Refined DRGs ............................................................................................................... 18
        3.3.3. AP-DRGs (New York DRGs)....................................................................................... 18
        3.3.4. Australian DRGs ........................................................................................................... 19
        3.3.5. Other DRG variants ...................................................................................................... 27
        3.3.6. 3M variants (AP-DRGs, APR-DRGs, and IAP-DRGs)................................................ 27

4.      DRG GROUPER SOFTWARE .................................................................................................28
     4.1. The purpose and nature of DRG Grouper software .............................................................. 28
     4.2. Features of good Grouper software....................................................................................... 28
     4.3. The Macedonian Grouper ..................................................................................................... 30

5.      CLASSIFICATION OF DIAGNOSES AND PROCEDURES ...............................................31
     5.1. Development of ICD10-AM ................................................................................................. 31
     5.2. The key coding rules for DRG classification........................................................................ 33
        5.2.1. Understanding the manuals........................................................................................... 35
        5.2.2. The recording and coding of principal diagnosis.......................................................... 35
        5.2.3. Impact of incorrect selection of principal diagnosis ..................................................... 36
        5.2.4. The recording and coding of additional diagnoses ....................................................... 37
        5.2.5. The recording and coding of procedures....................................................................... 38
     5.3. DRG data analysis................................................................................................................. 39
        5.3.1. Analysis of coding quality and DRG complexity ......................................................... 39
        5.3.2. Analysis of hospital performance.................................................................................. 40

6.      COSTING ....................................................................................................................................42
     6.1. Importance of Costing........................................................................................................... 42
     6.2. What do we mean by 'cost'? .................................................................................................. 42
     6.3. Calculating cost weights ....................................................................................................... 43
        6.3.1. The concept of cost-weights ......................................................................................... 43
        6.3.2. Developing valid cost-weights...................................................................................... 44
        6.3.3. Measuring efficiency..................................................................................................... 44
     6.4. Costing Methodologies for Actual Average Costs................................................................ 45
        6.4.1. Top-down: the Step-Down method or cost-modelling.................................................. 45
        6.4.2. Bottom-up: activity-based costing ................................................................................ 48
     6.5. Australian DRG Costing ....................................................................................................... 52
        6.5.1. Calculating costs ........................................................................................................... 52

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      6.5.2. Cost weight development.............................................................................................. 53
   6.6. Summary ............................................................................................................................... 54



ATTACHMENT 3: LIST OF AR-DRGV5 DRGS...........................................................................64

ATTACHMENT 4: DRGS PER TOTAL LENGTH OF STAY*....................................................76

ATTACHMENT 5: GLOSSARY .......................................................................................................78

  KAROL Consulting                                                                                                                              3
                                      Macedonian DRG Manual DRAFT


This document has been developed as part of the Karol Consulting technical assistance project under
the World Bank Health Sector Management Project (HSMP).

The specific requirement of this technical assistance is to develop the new hospital payment model
which provides for the funding of acute hospital care based on the Australian DRG classifications.
The new payment model will establish provider incentives for the effective and efficient delivery of
care and support the financial sustainability of the system.

The purpose of this document is to provide background information for Macedonian health
professionals, so they will be better able to participate in planning and implementation in the DRG
system in Macedonia. It should serve as a reference for all those about to work with DRGs and as a
refresher for those already with the new classifications and payment system.

The document1 contents are as follows:

In Section 1 is a brief introduction to the current situation in Macedonia, description of the aims of
DRGs and progress at the time of writing this document.

In Section 2, we explain that the DRG classification is an iso-resource classification (the classes are
intended to contain patients that consume similar quantities of resources) which can therefore be used
for hospital payment purposes.

Section 3 explains the origins of the DRG classification. It describes the assignment logic (how the
DRG of a case is determined), and describes the main variants of the DRG classification. Most
attention is paid to the Australian DRG variant because it has been selected for use in Macedonia.

Section 4 describes the computer software that is normally used to determine the DRG of each case on
the basis of the source information (the principal diagnosis, other diagnoses, procedures, age, and so
on). It also provides a brief description of the Macedonian grouper.

Section 5 describes the ICD-10-AM diagnosis classification and the ICD-10-AM procedure
classification as well as some basic rules about clinical coding for the purpose of producing DRG
data. Also in this section we describe the key criteria for used in the analysis of DRG coding.

In Section 6, we discuss costing approaches related to DRG development including top-down and
bottom-up costing. We also describe the cost weight development process and offer some experience
of costing in Australia.

 Parts of this document are based on a similar document authored by Prof. Don Hindle, Prof Bozo Ljubic and Dr Karolina
Kalanj for Medicare Australia under the World Bank SITAP project in Bosnia and Herzegovina.

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          1.1. Background
A feature of the Macedonian healthcare system is a purchaser-provider split where the Macedonian
health Insurance Fund (HIF) purchases healthcare services from a network of publicly owned
hospitals, the majority of which are owned by the MOH.

An important element of the Government’s health financing strategy is the introduction by HIF of a
new method of funding hospitals which involves the application of casemix based funding, where
hospital outputs would are measured in terms Diagnosis Related Groups (DRGs). The introduction of
the new hospital payment method has support from the highest levels of Government, including the
Prime Minister who has set timelines for the implementation of DRGs.

This document is designed to support the smooth transformation from the current system of financing
hospitals based on historical allocations, to a prospective payment system based on output as
measured by DRGs. Specifically it is aimed at helping to develop an understanding by all actors
involved in DRG implementation about the main intent and features of DRGs and the key activities
that comprise the implementation process.

          1.2. DRG implementation
The government has put priority on DRG implementation and is using its existing resources that
include the HIF, the MOH and the HSMP to drive the implementation of DRGs in Macedonia.

          Legal basis
          To give the casemix payment model a legal basis, the Government passed a by-law
          authorising payment of hospitals by DRGs from 1st of July 2008. The by-law states that from
          1st July, which was nominated as the starting date of DRG implementation, hospital payments
          can vary up or down 20% from the current budget. According to the law, the amount of the
          hospital budget variance depends on the individual hospital’s efficiency which would be
          measured by DRG activity data generated efficiency index and other quality measures. It is
          anticipated that hospitals that operate more efficiently than the average would be rewarded by
          additional funding, while those whose efficiency is below the average would receive less

          Australian DRGs
          The Macedonian Government has purchased a full licence to the Australian AR-DRG system.
          The licence provides the Government with the right to adjust the system to suit the needs of
          Macedonia and to develop software to operate the system. The relevant AR-DRG manuals
          and much of the supporting documentation have been translated into Macedonian.

          DRG Coordination Group
          The Prime Minster has formed the DRG Coordination Group headed by Mr Petar Karanakov
          to lead the implementation of DRGs. The Group has been effective in supporting the

    As at November 2008

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       development of the Macedonian Grouper, in initiating coding practice and in the process of
       change management.

       Grouper development
       Macedonia has chosen to develop its own DRG grouper for AR-DRGs. The software is web
       based and hospitals have been inputting activity data since February 2008. A comprehensive
       User Guide has been prepared for the grouper.

       Although DRG coding has been going on since February 2008 additional training was
       provided in June and a new phase was entered into for the collection of improved DRG data
       as from 1st July 2008; a help line to field hospital queries was also established. Attachment 1
       includes letters sent to hospitals advising them of the procedures for the new DRG coding

The HIF has established good analytical structures which will form the basis for developing a DRG
funding model for inpatient payments to hospital. The key elements of the HIF analytical and
modelling activities are as follows:

       Hospital by hospital activity target setting as part of the payment system
       The activity targets are established in the hospital Business Plans that set activity goals in
       terms of patient throughput per department - which is categorised according to ICD
       classifications. The hospitals then attach a weight to the activities according to the existing
       points based payment system which subsequently leads to the calculation of the prospective
       hospital budget.

       Analysis of DRG activity data
       The HIF has taken the initiative and begun analysing DRG activity data. The analysis has
       calculated weighted activity, the average cost per inpatient, the casemix indexes for all
       hospitals and hospital acute budgets.

       Cost standard data reporting
       Cost standard data reporting is required from all hospitals according to a standard chart of
       accounts. The reporting requirements include the following cost elements: operating expenses
       including - salaries, maintenance, heating, communication, transport, minor purchases;
       capital equipment maintenance and up keep; interest; loan repayment; co-payment income
       transferred to HIF; building investments; furniture; car, equipment; and contingency. On the
       revenue side, hospitals also report how much revenue they receive from HIF and how much
       they receive from other sources against each of the expenditure line items.

       Notional revenue based on invoice claims
       The current points based invoicing system is used to validate the budget allocations to
       hospitals. It is understood that the invoice claims are generally in concert with actual hospital
       expenditures and the average variance between the expenditure and invoice claims is within

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         2.1. Overview of classifications and measures
We will begin with the basics – explaining the main types of classifications used in health care, and
indicating the type to which the DRG classification belongs.

Classifications differ in terms of the criterion of similarity used to determine membership of each
class. In the health care context, the most important measures of similarity of cases are as follows:

     •   health problem (diagnosis, condition, care need)
     •   method of care (intervention, procedure, therapy, etc)
     •   outcome of care (the effect on the patient’s health status)
     •   utility (value, worth, benefit) of care
     •   prognosis (expected health status after treatment)
     •   cost of care (resource use).

The measures listed above are often categorized as ‘clinical’ or ‘management’.

         2.1.1.     Clinical classifications
Clinical measures are health problem and method of care. For example, we could decide that the
criterion is diagnosis – and therefore that patients with the same or a similar diagnosis will belong to
the same class.

In particular, clinicians and epidemiologists have paid particular attention to homogeneity of classes
with respect to presenting problems and methods of care. Examples are the International
Classification of Diseases (ICD) and the International Classification of Primary Care (ICPC). The
data from the use of classifications like these are extremely useful for many purposes, but do little to
facilitate management of health care in the interests of value for money.

         2.1.2.     Management measures
Management measures include cost, outcome, and utility. For example, we could decide that the
criterion of similarity is the cost of care – and therefore that patients with the same or a similar cost of
care will belong to the same class.

For example, in some health systems, visits to the family doctor are classified as ‘short-time’ and
‘long-time’. Thus the classification is cost-based (longer visits cost more on the average).

         2.2. Casemix classifications
The most useful classifications in health are those that define product classes (health care episodes) by
use of both clinical attributes (measures of condition and intervention) and by one or more
management variables. These are popularly known as ‘casemix’ classifications.

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The most common approach involves using cost as the variable of global interest. The result is the
iso-resource classification (where iso means equal). Diagnosis Related Groups (for acute inpatient
care), Resource Utilisation Groups (for nursing home care), and Ambulatory Patient Groups (for
hospital-based ambulatory care) are of this type.

In healthcare, it is in most instances easier to measure cost than (say) outcome (although measuring
product costs can be a complex process). Moreover, by measuring cost there are more opportunities to
improve efficiency – and cost containment is inherently desirable if it is possible to validate the extent
to which the products should have been produced, or were in fact produced in a satisfactory manner.

It is therefore not surprising that iso-resource casemix classifications have been favoured by health
care funders and purchasers in the interests of promotion of what economists call technical efficiency
(that is, ensuring the minimal cost is incurred when producing a product or service of defined quality).

A few casemix classifications are designed to be iso-quality, iso -prognosis, iso-outcome, or iso-utility
(remember iso means equal). For example, Oregon Casemix Classes (OCCs) are similar to DRGs,
but they were designed to be homogeneous with respect to utility as well as cost (see Figure 1).
Health Benefit Groups, as used in the UK, are intended to be iso-resource and iso-outcome.

If an attribute, such as cost is not incorporated into the logic of the classification system, there are
risks that it will be ignored. Thus, ICD-10 is of little use by itself, if the purpose is to manage the
costs of care. This is one reason why the DRG classification was developed: cases with clinically
similar presenting problems were assigned to the same classes only where the costs of care would also
be similar.

DRGs are more useful than ICD classes therefore in the management of cost. However, OCC classes
are more useful than DRGs if the purpose is to manage utility as well as cost and this is reflected in
the classes themselves. There are more OCCs than DRGs for neonatal care, because there are widely
different outcomes for episodes of about the same cost. However, there are more DRGs for health
problems where cost varies without much effect on outcome. For example, the presence of
complications is more likely to change costs than outcomes.

Figure 1: Some high-ranking and a few low-ranking Oregon Casemix Classes

            Utility rank
     (value for money – lower the                          Case description
      number higher the utility)
                  4                 Removal of foreign body in pharynx or larynx
                  5                 Appendicectomy for appendicitis
                 10                 Ectopic pregnancy
                 18                 Medical therapy for syphilis
                 ...                …
                 673                Cryosurgery for viral warts
                 692                Gastroplasty for obesity
                 698                Hemorrhoidectomy, uncomplicated
                 709                Life support, reduction deformities of brain

Some people believe we should move towards increased use of iso-utility classifications. They argue
this is certain to happen as the interest in allocative efficiency grows. By allocative efficiency, we
mean focusing on how funds are allocated to different kinds of products or services to achieve the best
system outcomes. They say it is more difficult to accurately measure utility than cost, but utility is
more valid than cost. If we have to choose between accuracy and validity, we should choose validity.

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Encouragement of increased production at lower cost makes little sense if a health care product is
worth nothing at any cost.

However, other people argue it is more practical to use an iso-resource classification. They say it is
obviously risky to put excessive emphasis on technical efficiency, but the risks can be controlled in
other ways – for example, by monitoring quality of care and by controlling the volumes of provision
of services of low value (An example of a survey questionnaire that can be used to improve hospital
efficiency is enclosed in Attachment 2).

No approach is obviously optimal, and success depends on attention to detail. Macedonia, like most
countries with well-managed health systems, has chosen to use DRGs. The key is now to make sure
that the details are well-designed and implemented.


There are several classifications of complete episodes of acute inpatient care. Most are iso-resource:
that is, episodes assigned to the same class are intended to be similar in both clinical respects and in
terms of resource use. Examples include Patient Management Categories, Severity Staging,
Diagnostic and Treatment Categories, and Diagnosis Related Groups (DRGs).

The DRG classification has been chosen by Macedonia for good reasons. It is the most widely used, it
has been evaluated and improved over many years, there are many software tools to support its use,
and there are excellent benchmarking statistics that are easily available. This Section provides some
basic information for the general reader.

       3.1. The history of DRGs
Relatively little use was made of standard classifications of patient care episodes to inform health care
management until the late 1960s. At that time, some of the practical constraints to classification
development were alleviated by the emergence of computerized discharge databases, and advances in
multivariate analytical techniques.

This led to the development of several iso-resource classifications, and most of the early work
concerned acute inpatient care. This was partly because of the easy availability of computerized
clinical data, but also because acute inpatient care accounted for a large proportion of health care

The most important early classification was Diagnosis Related Groups (or DRGs). It was developed
after 1975 by a team at Yale University, mainly for use by a small number of hospitals in New
England. Other classifications, like Patient Management Categories and Disease Staging, had many
admirable features. However, they failed to attract widespread interest. One factor was that they
were not as effectively marketed to funders as were DRGs.

The DRG classification was designed primarily to help hospital managers to identify problems of
production management. By analyzing inpatient data files after categorization by DRG, it would be
possible to identify unusual cases that might then be the subject of further investigation.

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For example, an unusually long stay for a patient in DRG X, compared with the average for that DRG,
might indicate poor discharge planning or failure to document a complicating factor. On the other
hand, unusually short stays compared to the average for the DRG might point to poor quality of care
or unnecessary admission.

These kinds of uses are still considered important. However, the potential for use of DRGs as the
basis for payment was soon recognized, and has become the dominant interest in most countries.

Indeed, the DRG classification almost immediately caught the attention of US purchasers of health
care. Patients in the same casemix class should be similarly costly to treat, and therefore a standard
payment rate can apply. This is a particularly attractive idea for payers who have been experiencing
widely different payment claims for patients who appeared to be clinically much the same.

This was exactly the concern of the US Federal government. It therefore supported improvements in
the DRG classification after 1975, and subsequently used it as the basis for its Medicare ‘Prospective
Payment System’ which was activated in 1983. By ‘Prospective Payment System’, the Americans
simply mean payment of a predetermined amount for an entire inpatient episode (rather than paying
an amount determined after discharge on the basis of the actual number of days the patient remained
in hospital). In other words, the US government’s ‘Prospective Payment System’ is a method of
paying on a per case basis. It was happy to abandon previous arrangements, whereby it had simply
reimbursed the costs of the care that the hospitals chose to provide.

The same DRG-based per case payment model was adopted by many US states from 1985 onwards,
and this stimulated the development of several competing classifications during the early 1980s. For
example, the major US private insurer, Blue Cross, sponsored the development of Patient
Management Categories as a direct competitor to DRGs.

Work also began with respect to classifications of other types of episodes such as Resource Utilization
Groups for nursing home care, and Function Related Groups for rehabilitation as noted above. In due
course, these were also applied to care provider payment. In general, the US developments were
driven largely by the interests of payers. This is not surprising, given the inability of US payers to
control expenditure increases in other ways.

In Australia, there has been a different emphasis. The interest in casemix was stimulated by the
reported success of DRG-based payment in controlling the rate of growth of US Medicare
expenditures after 1984, but there was always a strong view that the aim of application of casemix
classifications was to encourage a more sensible allocation of existing resources rather than to reduce
overall expenditures. Unlike the USA, Australia has been successful in containing most types of
health care expenditures in other ways. Most obvious, public sector budgets have been capped, and
this has had a flow-on effect in the private sector (and particularly in the private hospital sector).

The first Australian state to use DRGs fully for inpatient payment was Victoria in 1993. By 1996, all
State and Territory health authorities had begun to use DRGs in some way for payment purposes. The
private sector began to introduce DRGs for payment at about that time.

Figure 2 shows some of the countries currently using DRGs, and the associated diagnosis and
procedure classifications. Nine countries in the list are using the same classifications to those to be
used in Macedonia. Germany began with Australian DRGs (AR-DRGs) in 2003, but has since made
some modifications – and the classification is now called German DRGs.

In many of the listed countries, DRGs are used at least in part as the basis for hospital payments.
However, even where DRGs are fully in use, there are other aspects of hospital payment that are not
based on DRGs. For example, some countries do not use DRGs to pay for days of intensive care, or
for rehabilitation. Some countries use DRGs to pay for episodes of mental illness and others do not.

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Figure 2: per case, diagnosis, and procedure classifications in selected countries (2005)

                                                              Used in
           Country           Classification system                       Diagnosis coding   Procedure coding

 Canada                     Casemix Groups              Some Provinces   ICD-10-CA          CCI

 Australia                  AR-DRG                      Yes              ICD-10-AM          ICD-10-AM
                            Healthcare       Resource
 Great Britain              Groups
                                                        Yes              ICD-10             OPCS-4

                            HCFA-DRG,        AP-DRG,
 United States              APRDRG, etc
                                                        Yes              ICD-9-CM           ICD-9-CM

 Austria                    LDF                         Yes              ICD-10             ACP

 Belgium                    APR-DRG                     Yes              ICD9-CM            ICD9-CM

 Bulgaria                   IR-DRG                      No               ICD9-CM            ICD9-CM

 Bosnia and                 AR-DRG                      No               ICD-10-AM          ICD-10-AM
 Croatia                    AR-DRG                      No               ICD-10-AM          ICD-10-AM

 Czech Republic             AP-DRG, IR-DRG              Yes              ICD-10             ICPM

 Denmark                    Nord-DRG, Dk-DRG            In part          ICD-10             NCSP

 Finland                    Nord-DRG                    Yes              ICD-10             NCSP

 France                     GHM, EfP                    Yes              ICD-10             CDAM

 Germany                    G-DRG (AR-DRG)              Yes              ICD-10 SGBV        OPS-301

 Greece                     HCFA-DRG                    In part          ICD-9-CM           ICD9-CM

 Ireland                    AR-DRG                      In part          ICD-10-AM          ICD-10-AM

 Italy                      HCFA-DRG APR-DRG            Yes              ICD-9-CM           ICD)-CM

 Netherlands                DBC                         No               ICD9-CM            CVV

 New Zealand                AR-DRG                      Yes              ICD-10-AM          ICD-10-AM

 Norway                     Nord-DRG                    Yes              ICD-10             NCSP

 Portugal                   HCFA-DRG                    Yes              ICD9-CM            ICD9-CM

 Romania                    AR-DRG                      Yes              ICD-10-AM          ICD-10-AM

 Singapore                  AR-DRG                      Yes              ICD-10-AM          ICD-10-AM

 Slovenia                   AR-DRG                      In part          ICD-10-AM          ICD-10-AM

 Spain                      HCFA-DRG                    Some Provinces   ICD9-CM            ICD9-CM

 Sweden                     Nord-DRG                    Yes              ICD-10             NCSP

 Switzerland                AP-DRG                      In part          ICD-10             ICD-9-CM

 Turkey                     AR-DRG                      No               ICD-10-AM          ICD-10-AM

         3.2. The general logic of all DRG variants
A predecessor of DRGs was designed in 1975 that had about 250 classes. Its structure was simplified
by 1977, the name 'DRG' was introduced, and the number of classes was increased to 383. The
general logic of the DRG assignment process was stabilized at that time, and has hardly changed since

The logic is summarized in Figure 3. The first assignment of a case (patient episode of acute inpatient
care) is to a major diagnostic category (MDC) according to principal diagnosis (which is defined as

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Figure 3: the general logic of Diagnosis Related Groups

  All acute inpatients

  What was the principal diagnosis?

  MDC #1                         MDC #2            MDC #3              …      MDC #23

  Was there a significant procedure?

                    Yes                                                No
  Surgical partition of MDC #1                     Medical partition of MDC #1

  What was the main procedure?                     What was the principal diagnosis?

                                                   Clusters of similar diagnoses, also split on age and
                                                   significant secondary conditions

                                 Procedure         Procedure                  Procedure
  Procedure cluster #1
                                 cluster #2        cluster #3                 cluster #N

                                                 Surgical adjacent DRGs

  What age group?

                    Over X                                             Under X

  Age over X                                       Age under X

  Was there a significant secondary condition?

                    Yes                                                No
  Age over X with significant                      Age under X with significant secondary
  secondary condition                              condition

the main reason why the patient was admitted). MDCs are largely categories of body systems. For
example, MDC 1 is diseases and disorders of the nervous system, and MDC 4 is diseases and
disorders of the respiratory system.

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The next assignment is to either the surgical or the medical partition of the MDC. Assignment is to
the former if a significant procedure was performed. A significant procedure is defined as one that
carried some risk and is usually performed in an operating room.

Third, the case is assigned to a cluster of related procedures if in the procedure partition, and
otherwise to a cluster of related principal diagnoses. These clusters, such as 'lens procedures' or
'stroke', are called adjacent DRGs (or A-DRGs).

The majority of the diagnoses and procedure clusters are then split into age categories, usually at 18
and 70. Finally, some clusters (and especially those for patients over 18) are split into parts with or
without significant secondary diagnoses (termed complications and comorbidities or CCs). Other
variables are used in rare cases, such as type of discharge.

Although the general logic remains hardly changed, there has been a progressive increase in
exceptions. In other words, many more case types have been identified for which the general
assignment rules make little sense – such as patients with AIDS-HIV or who have multiple organ

Most of the case types needing different treatment are best handled by considering them before the
first split into MDCs. They are therefore known as pre-MDC classes. An example is an admission
involving bone marrow transplant: if a procedure code is present in the discharge record indicating
this procedure, assignment is to a single DRG without regard to principal diagnosis, secondary
diagnoses, and so on.

The data elements required to assign an episode to a DRG are shown in Figure 4. There are
differences between variants in this regard, but the most important variables are more or less the

Figure 4: the main data elements required to assign an episode to a DRG

  Principal diagnosis               The diagnosis established after study to be chiefly responsible for occasioning the patient’s
                                    episode of care in hospital (in other words, the main reason for admission).
                                    Note that Canadian DRGs (Casemix Groups or CMGs) use a different definition: the
                                    principal diagnosis is the one that was responsible for most of the cost of care.
  Main (most resource-intensive)    In the DRG context, a procedure is a clinical intervention that:
  procedure                         o       is surgical in nature; and/or
                                    o       carries a procedural risk; and/or
                                    o       carries an anesthetic risk; and/or
                                    o       requires specialized training; and/or
                                    o       requires special facilities or equipment only available in an acute care setting.
                                    Usually, only one procedure affects DRG assignment. If more than one is recorded, the
                                    DRG software chooses the one that would normally be the most costly.
  Additional diagnoses              A condition or complaint either coexisting with the principal diagnosis (comorbidity) or
  (significant comorbidities and    arising during the episode of care (complication).
  complications)                    Not all additional diagnoses should be recorded, and only a subset will be selected by the
                                    DRG logic as significant – and therefore likely to result in higher costs of care.
  Patient age at admission          Usually recorded as age in years. However, age in days is used for neonates.
  Gender                            Male or female
  Mode of separation (destination   Status at separation of person, and destination where relevant. Only three categories are
  after discharge)                  used in most DRG variants as follows:
                                    q discharge to home
                                    q transfer to another hospital
                                    q death.
  Birthweight of neonate            Birthweight is used by most variants. A few use weight at admission.

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       3.3. The main DRG variants
In this section we briefly summarize the main variants of DRGs that have been used for hospital
payment purposes. We also mention a few classifications that were designed to be equivalent to
DRGs but which are sufficiently different to merit a different name.

        3.3.1.     HCFA DRGs

The HCFA variant is of particular interest, because it has been chosen for use in several European
countries – and is still being used by some of them. It is the most important variant in the USA and
therefore deserves more discussion.

            The US federal government’s Medicae and Medicaid agency, HCFA

        The Health Care Financing Administration (HCFA) is the US federal government agency
        responsible for payment of health care providers under the national insurance scheme for the
        elderly (Medicare). It also carries the responsibility for oversight of aspects of the State-run
        Medicaid insurance scheme for other disadvantaged population groups (such as the
        unemployed and low-income families). In total, HCFA provides health insurance for over 74
        million people.

        In 1998, the name of HCFA was changed to the Centers for Medicare & Medicaid Services
        (CMS). We will use the old term, HCFA, in this document.

            Yearly refinements since the introduction of DRG-based payment in 1983

        In 1983, the DRG classification was adapted by HCFA to suit its needs for a new payment
        approach (called prospective payment in the USA). This meant changing from payment for
        itemized services (each day of stay, each procedure, etc) to a single predetermined amount for
        each case type (DRG).

        The logic of DRG assignment was as described above. Thus, assignment is first to a Major
        Diagnostic Category (MDC) on the basis of the principal diagnosis. Within most MDCs,
        cases are then divided into surgical DRGs (based on a surgical hierarchy that orders
        individual significant procedures or groups of procedures by resource intensity) and medical
        DRGs. Medical DRGs are mostly differentiated on the basis of principal diagnosis and age.
        Some surgical and medical DRGs are further differentiated based on the presence or absence
        of complications or comorbidities (CCs).

        Generally, the HCFA variant does not consider other procedures; that is, nonsurgical
        procedures or minor surgical procedures generally not performed in an operating room are not
        listed as operating room (OR) procedures in the classification logic. However, there are a few
        non-OR procedures that do affect DRG assignment for certain principal diagnoses, such as
        extracorporeal shock wave lithotripsy for patients with a principal diagnosis of urinary stones.

        HCFA has modified its DRG classification almost every year since 1983. The 19th update
        was introduced in 2001.

        The most important structural changes made by HCFA were introduced in 1987. In earlier
        versions, the final split was into two, based on whether there were CCs or the patient was 70
        years or over. In other words, a patient was considered to be more costly if over 70 years of

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                               Macedonian DRG Manual DRAFT

      age, or had one or more CCs, or both. From HCFA's 1987 version, use of the split at age 70
      was abandoned.

      Second, the CC exclusion list was introduced. In brief, early HCFA versions used a single list
      of CCs, which applied in all cases. The CC exclusion list defined cases where some CCs do
      not apply (that is, are not considered significant secondary conditions) for particular principal

      Some ‘Pre-MDC’ classes have been added. In general, cases are assigned to an MDC based
      on the principal diagnosis, before assignment to a DRG. However, there are five DRGs to
      which cases are directly assigned on the basis of procedure codes. These are the DRGs for
      liver, bone marrow, and lung transplants (DRGs 480, 481, and 495, respectively) and the two
      DRGs for tracheostomies (DRGs 482 and 483). Cases are assigned to these DRGs before
      classification to an MDC.

      Overall however, the HCFA variant of DRGs has retained most of the general logic described
      above, even though more significant changes have been considered over the years. The main
      reason why so few structural changes have been made is that HCFA has been concerned
      about the possible unintentional effects in a system that distributes nearly $100 billion to
      almost every hospital in the USA each year.

      The slow rate of change is illustrated by the only minor increases in the number of DRGs.
      The 1983 version had 470. After nearly 20 years, the 2001 version of HCFA DRGs had only
      503 classes. Large numbers of changes had been made in the detail, but hardly any
      significant structural or logical changes had been made.

      HCFA has considered major changes on several occasions. For example, it commissioned the
      development of Refined DRGs in the late 1980s, which recommended a classification with
      over 1200 DRGs. However, it never implemented any of its main features.

      Similarly, it was instrumental in major research conducted between 1993 and 1997, which led
      to the design of what are called All-payer Severity-adjusted DRGs (APS-DRGs). This
      research has also not yet made any significant impact on the classification used for payment
      (although a few research studies have used APS-DRGs).

          Source data for HCFA DRGs

      Cases are classified into DRGs for payment under the prospective payment system based on
      the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed
      during the stay, as well as age, sex, and discharge status of the patient. Thus there are fewer
      variables in total than in the Australian variant.

      The diagnosis and procedure information is reported by the hospital using codes from the
      International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM).

      HCFA believes that many of the weaknesses in the DRG classification are direct consequence
      of weaknesses in ICD-9-CM. In its report to the US Federal government in 2002, it stated
      that a more sophisticated and detailed classification system, such as ICD-10-PCS, should be

      It is necessary to update ICD-9-CM each year. The ICD-9-CM Coordination and
      Maintenance Committee was formed in 1985. It is co-chaired by the National Center for
      Health Statistics (NCHS) and HCFA. The NCHS has lead responsibility for the ICD-9-CM
      diagnosis codes, and HCFA has lead responsibility for the ICD-9-CM procedure codes.

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          The Medicare Code Editor

      HCFA uses contracted payment agencies called ‘Medicare fiscal intermediaries’. They enter
      the payment claims information from hospitals into their claims processing systems and
      subject it to a series of automated screens called the Medicare Code Editor (MCE). These
      screens are designed to identify cases that require further review before classification into a
      DRG. After screening through the MCE and any further development of the claims, cases are
      classified into the appropriate DRG by the Medicare Grouper software program.

          Method of updating of the DRG classification

      The records for all Medicare hospital inpatient discharges are maintained in the Medicare
      Provider Analysis and Review (MedPAR) file. The data in this file are used to evaluate
      possible DRG classification changes and to recalibrate the DRG weights.

      Since 1999, HCFA has begun to accept data from other sources for the purpose of exploring
      possible changes to DRGs and the payment rates. Data are required to be submitted about
      eight months in advance of the date for finalization of the DRG list for the next financial year.

          An example of the updating process: cardiac defibrillators

      The year 2000 version of HCFA DRGs had two DRGs with the following descriptions: DRG
      104 (cardiac valve & other major cardiothoracic procedures with cardiac catheterization) and
      DRG 105 (cardiac valve & other major cardiothoracic procedures without cardiac

      HCFA analyzed its database and found that the average charges were $84,060 for DRG 104,
      and $66,348 for DRG 105. However, the average charges for cases with ICD code 37.94
      (Implantation or replacement of automatic cardioverter/defibrillator, total system [AICD])
      were lower. They were $74,719 for DRG 104, and $59,267 for DRG 105. The charges for the
      residual cases (without ICD code 37.94) were much higher on average: $91,366 for DRG 104
      and $67,323 for DRG 105.

      HCFA concluded that the defibrillator cases are significantly different from other cases in
      DRGs 104 and 105, and therefore created two new DRGs: DRG 514 (cardiac defibrillator
      implant with cardiac catheterization) and DRG 515 (cardiac defibrillator implant without
      cardiac catheterization). The residual cases remained in DRGs 104 and 105.

          Calculation of DRG weights (payment relativities)

      HCFA must set payment relativities for its DRGs each year. Unlike in several other countries
      (including Australia and Germany), the payment relativities are based on hospital charging
      data rather than direct estimates of hospital cost. Equally important, HCFA weights only
      apply to hospital payments: most medical services are billed separately (and using a quite
      different payment model). In other words, a patient is billed by the hospital on a DRG basis,
      and receives other bills directly from doctors involved in providing the care.

      Several agencies have decided to use the HCFA variant, including some that make a single
      payment for each inpatient episode (including medical costs) like Portugal. However, a few
      studies have shown that the exclusion of medical costs means the cost weights (and elements
      of the classification itself) are not ideal. For example, a study in Spain concluded that HCFA
      DRGs are unsuitable with respect to ambulatory surgery, and for DRGs that involve the use
      of prostheses.

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                                Macedonian DRG Manual DRAFT

      Yet another factor in the US context is that there is no direct ceiling on total payments to
      hospitals, unlike in other countries including Australia, Slovenia, Romania, and Macedonia.
      The payment per case is fixed each year, but the number of patients by casemix class is only
      indirectly controlled (mainly by retrospective auditing of appropriateness of admission to

      This means that adjustments to the DRG classification and associated payment weights must
      be made with great care, in order to avoid the risk that total payments will be excessive. The
      main consequence is that changes are much less frequent than in other countries, where total
      payments are controlled in a more direct way.


      Strictly speaking, the HCFA grouping algorithm is public, and anyone can implement it in
      software. There are books published so that one could even do without the software and
      assign DRGs by hand. However, HCFA recently decided to give an exclusive contract to
      Health Information Systems (a division of 3M) as the distributor of the reference grouper,
      which is written in IBM 360 Mainframe assembler.

             Recent versions of HCFA

      There have been many changes of detail since 1983, but many of the main features have
      remained unchanged. Some of the more important features of recent versions are as follows.

        1.    The original numbering system has been retained. HCFA-3 DRGs, as introduced in
              1983, had 470 classes, numbered from 1 to 470. Where new DRGs had to be created,
              they were added at the end. Thus, DRGs numbered from 471 to 523 are those
              introduced from HCFA-4 onwards.

        2.    Much use is made of age splits, but almost always the split is at age 17. There is only
              one other age split, for diabetes at age 35.

        3.    Virtually all the splits on presence of significant comorbidities or complications (CCs)
              are binary – with CC or without CC.

        4.    Where a DRG is replaced, the DRG number is retained in the list, but marked “No
              longer valid”.

        5.    Because the target population is mostly elderly, the HCFA variant continues to be
              relatively weak with respect to childhood. For example, neonates are handled by only
              7 classes, and they have been hardly changed for many years.

        6.    Pre-MDC DRGs are few in number, and have all been added since the HCFA-3 variant
              (with only one exception, heart transplant). We recall that a pre-MDC case is where
              the general logic of assignment (principal diagnosis to MDC, surgical or medical
              partition depending on presence of a procedure, etc) is over-ridden. This is another
              indicator of the slow rate of change in assignment logic.

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        3.3.2.     Refined DRGs
Some US states have developed their own variants, for use mainly in their Medicaid programs, in
order to overcome some of the perceived weaknesses of the HCFA variant. One of these variants,
used by Ohio and a few other States, is called the Refined DRG classification (R-DRG). The
development of this variant was actually commissioned by HCFA, but in the event, HCFA decided
not to use it.

The main distinctive feature of the R-DRG classification is that there are many more classes (over
1200) because all adjacent DRGs are split.

In other variants, most DRGs are not split at all by use of CCs. If DRGs are split, there are usually
only two subgroups (with and without CCs). In contrast, the R-DRG logic splits almost every DRG
into three or four sub-groups called severity levels.

There are also additional classes that do not appear in other variants. One category relates to 'early
death' – that is, where the treatment is incomplete because the patient dies shortly after admission.
There is one such class in every MDC.

This basic logic in the R-DRG classification has been used in a small number of other variants, both
within and outside the USA. None of the R-DRG models is widely used for payment, typically
because insurers believe there is too much administrative complexity in use and maintenance.

        3.3.3.     AP-DRGs (New York DRGs)
Another variant used mainly in the United States (but also in a few other countries) was developed
initially for use in New York State. It was originally termed the New York DRG variant, but was
later re-named All-patient DRGs (AP-DRGs). This was partly a marketing device – to encourage
others to use it. One factor was that New York contracted the 3M company to develop and maintain
its DRG classification, and 3M claims copyright (although there have been legal proceedings over

There was also some underlying logic in calling it 'All-patient'. The HCFA variant was developed
specifically to classify the mainly elderly beneficiaries of US Medicare, and New York State
deliberately modified it so that it was more effective in classifying a complete population including

The New York State Department of Health introduced its own adaptation in 1987, as the basis for
payments to all hospitals in the State. It was labeled NY-5, because it was a derivative of the fifth
HCFA version (HCFA-5).

To illustrate the differences between the HCFA and NY variants, consider NY-7. It had a total of 594
final classes, compared with 470 for HCFA-7.

There were four main logical differences. First, all tracheostomies (temporary and other) were
brought together into two new DRGs. In HCFA versions, tracheostomies were distributed among
many DRGs, but studies showed patients with tracheostomies were particularly expensive.

Second, there were differences in use of CCs, including creation of a third category called `major
CCs'. In most major diagnostic categories (MDCs), cases with particularly serious secondary
conditions were separated before the splits were made into clusters of related diagnoses.

In effect, cases were brought together because the secondary conditions were more significant than
differences between principal diagnoses. However, major CCs did not replace the final splits on CCs

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– those that split a cluster of related diagnoses or procedures according to presence or absence of at
least one significant secondary condition.

Third, there were more neonatal DRGs (31 compared with 7 in HCFA versions). They were defined
by age (under 29 days) rather than on the basis of presence of a neonatal diagnosis (the approach used
in HCFA versions). The difference partly reflected the fact that neonates were relatively unimportant
to HCFA, given that the large majority of its beneficiaries are elderly.

Finally, new DRGs were created for distinctive diagnosis and procedure groups. They related to
patients undergoing procedures where there is a secondary diagnosis of cystic fibrosis, perinatal
respiratory problems, liver transplant, cystic fibrosis where no procedure was performed, compulsive
nutrition disorders, high-risk deliveries, lead poisoning, congenital abnormalities, bone marrow
transplants, and aftercare.

A new cluster of DRGs (Major Diagnostic Category 24) was created for HIV-related illnesses, which
comprised 12 DRGs. Another new MDC (25) was created which had 5 new DRGs for significant
multiple trauma.

There were many other minor differences. While NY-7 retains all but one of the splits at age 18 used
in HCFA versions, it added 3 more, which were consequences of addition of new DRGs. For
example, NY-7 created pediatric and adult DRGs for ventricular shunt revision, because this
procedure was separated from other craniotomies. It also defined one new DRG for patients under
one year of age, and two for patients under 13 years old.

Several changes have been made in more recent versions since NY-7. In NY-8, for example, seven of
the 45 pediatric DRGs in NY-7 were split on presence or absence of CCs, thus creating seven more
final classes. Two new major CCs classes were added, and five other new DRGs were created by
splits on diagnoses and procedures. A new DRG was added to distinguish early death of neonate.

The concept of the `CC exclusion list' was always present in New York versions. Its use was
extended to the major CCs from NY-8 onwards. Thus, some secondary diagnoses on the major CCs
lists were not treated as major CCs for specific types of cases. The non-OR procedure modifier list
was introduced. If these procedures were present, they cause some secondary diagnoses to become
major CCs.

        3.3.4.     Australian DRGs
As noted above, the Australian variant has been chosen for use in Macedonia, and therefore merits a
more detailed description.

Australian interest was stimulated by the introduction of US Medicare's DRG-based payment system
in 1984. Several US versions were progressively adopted by Australian health authorities after that
date. They included the HCFA and R-DRG variants.

Three major studies were conducted in 1989-90, for the purpose of determining a standardization
strategy. In 1991, the Australian government endorsed a plan to take ideas from several US variants
and create a uniquely Australian variant. It would be called the Australian National DRG or AN-
DRG system (changed to AR-DRG in 1998).

The Australian Casemix Clinical Committee (ACCC) was established at that time to provide advice
on local modifications, together with a technical group that is intended to provide advice on non-
clinical aspects. The ACCC has representation from most clinical associations and colleges, and
makes use of expert subcommittees where appropriate. When New Zealand adopted the Australian
variant, it was also permitted to nominate its own clinicians as members of the ACCC.

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Version 1, which was released in 1992, had 527 classes. It was based mainly on AP-DRGs. However,
there have been so many changes over the years that the differences are now very large.

Many of its unique features concerned methods of splitting of the diagnosis and procedure clusters by
use of age and CCs. Most splits on CCs were binary (with or without CCs). There were no major CC
classes of the kinds used in New York versions. However, there were a few three-way splits on CCs
(none or minor, moderate, major) as replacements of binary splits.

Some of the binary splits on CCs that are present in US versions were eliminated, because they
seemed not to be justified by analysis of the available Australian discharge data. Unlike any US
version, the pediatric-adult split was at age 10 rather than at age 18.

Many detailed changes were made by moving diagnoses and procedures between AN-DRGs. The CC
lists were modified, and neonatal classes were defined by use of admission weight rather than

The initial intention was to update AN-DRGs every year. Indeed, Version 2 was released in July
1993, and had 531 classes. The changes were minor relative to version 1, and therefore several
agencies (including the State health authorities of New South Wales and Victoria) decided not to use
it. The additional information value was not sufficient to justify the large logistical cost of moving to
version 2.

This was a factor that led to the setting of a 2-year gap between versions 2 and 3. There was also a
gap of at least two years between versions 3 and 4. Version 4 was released in 1998, and all agencies
began to use it in 1999 or 2000. Version 5 was released in 2003, and it is this version that has been the
starting point for Macedonia.

            AN-DRG Version 3

        The main difference between versions 2 and 3 was simply that it had many more classes.
        Version 2 had 531, and version 3 had 667. One cause was that the number of classes defined
        by age was more than doubled, and that many more ages were introduced as class boundaries.
        Indeed, there were age splits at 5, 10, 15, 25, 35, 40, 45, 50, 55, 60, 65, 70, 75, and 80.

        The other major change for version 3 concerned the use of CCs. New binary splits were
        implemented, and more use was made of the concept of major CCs.

        Finally, additional combinatory logic was added, in response to the ACCC’s proposal to apply
        the concept of complicating clinical factors (CCFs).

        The ACCC argued there were four main reasons why the costs of patients in the same
        principal diagnosis or procedure cluster might vary: CC, age, complex principal diagnosis,
        and complex procedure. A cluster might therefore be split into with CCF and without CCF,
        where the former would indicate the presence of one or more of the four factors.

        In the event, the Australian government only accepted this idea in part. The result was a wide
        variety of methods of splitting of the diagnosis and procedure clusters, some of which are
        shown in Figure 5.

        There are still some that are split only on CCs. As in version 2, they can be two-way (like
        minor bladder procedures) or three-way (like major chest procedures).

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      Although not shown in Figure 5, there are also a few splits on age alone. An example is the
      split into circumcision under 10 and circumcision 10 or over.

      The Australian government also introduced many new splits that combine the factors. For
      example, the DRGs relating to TIA and precerebral occlusion, which were split into with CC
      and without CC in version 2, were split into three parts in version 3. The diagram shows that,
      if the patient is both 80 or over AND has a CC, assignment is to AN-DRG 67. If only one of
      the complicating factors is present, assignment is to AN-DRG 68. If neither factor applies,
      assignment is to AN-DRG 69.

      Other examples of this kind of logic are shown in Figure 5, and all have minor peculiarities.
      Note that major skin disorders cluster involves a three-way split on age (0-9, 10-44, and 45 or
      over). The diabetes cluster combines an age split with a three-way CC split.

      Although not shown in the diagram, there are a few examples of use of other complicating
      clinical factors. In version 2, lens procedures were split into with and without CCs. In
      version 3, they were modified so that assignment to the higher-weighted class would occur if
      a CC were present or if there were a vitrectomy.

          AR-DRG Version 4

      For the most part, there were only minor differences in logic between versions 3 and 4, and
      they were mostly below the adjacent DRG level. However, there were a large number of
      changes and therefore the classification was given a new name – Australian Refined DRGs, or

      The main structural modification involves use of an algorithm that takes account of the
      cumulative effect of multiple significant CCs. In other words, the complete set of CCs is
      noted and a weighted sum calculated called the patient's clinical complexity level or PCCL.
      Previous versions simply took note of the highest-ranking CC and ignored any others.

      It is a matter of common sense that the complexity and consequent cost of care would tend to
      increase in proportion to the number of CCs that were present. In fact, there is empirical
      evidence of this, including analyses undertaken in Australia.

      The approach is described fully in documentation from the Commonwealth Department of
      Health and Aged Care (CDHAC 1998). In outline, the set of diagnoses defined to be CCs
      was subjected to statistical analysis by a Departmental team, together with clinical review by
      the Australian Casemix Clinical Committee (ACCC).

      Incidentally, the effects of heavy involvement of the ACCC in this and other related matters
      has been a factor in causing other countries to conclude that AR-DRGs were clinically more
      acceptable. It is much easier for a predominantly public health care sector to stimulate the
      active involvement of practising clinicians than it is for commercial software companies in
      (say) the United States of America.

      Advice from the ACCC led to many changes in the CC lists, including the addition of 111
      diagnoses not defined as CCs in previous AR-DRG versions. The additional diagnoses
      included infections, nutritional disorders, fluid disorders, depressive and other psychoses,
      amnesia, eating disorders, skin and leg ulcers, incontinence, circulatory and respiratory
      disorders, child maltreatment, rehabilitation and a range of allied health interventions.

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      Figure 5: various kinds of splitting logic in AN-DRG version 3

             Diagnosis or procedure cluster                            Splitting method

             Minor bladder procedures                                      With CC

                                                                            No CC

               Major chest procedures                                   With major CC

                                                                       With non-major CC

                                                                            No CC

                                                    508             Age 45 or over AND
                Major skin disorders
                                                                         With CC

                                                    509              Age 10 to 44 OR
                                                                 Age 45 or over without CC

                                                                         Age under 10

                                                     67             Age 80 or over AND
            TIS and precerebral occlusion
                                                                         With CC

                                                     68        Age 80 or over without CC OR
                                                                  Under age 80 with CC

                                                     69                  Age under 80
                                                                           No CC

                Respiratory signs and               181                Age 75 or over OR
                     symptoms                                              With CC

                                                    182                    Under 75
                                                                            No CC

                                                    539              With major CC OR
                                                              Age 60 or over with non-major CC

                                                    540                  Age 60 or over
                                                                            No CC

                                                    541                  Age under 60
                                                                         No major CC

      The attributes indicating complexity were also increased by inclusion of general anesthesia.
      This is used to define complexity in three classes, to cater for pediatric patients and adults
      with intellectual impairment.

      The next step involved review of the significance of each CC. Each CC is assigned a score
      from 1 to 4, called the clinical complexity level or CCL, on the basis of observed effects on
      average in a study database (which comprises several years of discharges from the large
      majority of Australian hospitals). The CCL value for a CC is affected by the principal

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      The third step involved looking at the effects of there being more than one CC for an inpatient
      episode. A computational model was developed by analysis of the study database, which
      produces a score for the episode (the patient's clinical complexity level or PCCL) as a
      weighted combination of all CCs present in the inpatient episode.

      The idea is illustrated in Figure 6. It shows six patients, and how their CCs are used to
      calculate the additional complexity of care and consequent higher cost of care. The first part
      of Figure 6 shows the rules that applied for version 3 where (like HCFA, AP-DRG, and all
      other widely used variants) the complexity is determined simply by the maximum CCL value
      of all the secondary diagnoses in a record.

      The second part shows the effects of the new logic. On the whole, a patient with a larger
      number of significant secondary diagnoses is given a higher complexity score.

      The sense of this change is obvious, and is supported by empirical analysis. The
      Commonwealth Department of Health and Aged Care (CDHAC 1998) concludes that "… it
      has produced a better set of CCs for version 4 in terms of measuring higher resource use."
      One important indicator of improvement is that the use of age to signify cost differences has
      been reduced. The number of DRGs defined only by an age split fell from 20 to 8, and the
      number defined by both age and CC fell from 60 to 32. The number of DRGs defined by CC
      alone increased from 81 to 126. Of these 19 are three-way CC splits, compared with only 5 in
      version 3.

      Figure 6: illustration of the effects of the new CC logic

      Patient                         CCs with their CCL values                    Patient's
                   CC #1      CC #2        CC #3     CC #4        CC #5   CC #6     CCL

     Logic in Australian DRGs, version 3

        A            4          3                                                     4
        B            4                                                                4
        C            3          3                                                     3
        D            2          2            2         1            1       1         2
        E            2                                                                2
        F            1          1            1         1            1                 1

     Logic in Australian DRGs, versions 4 and 5

        A            4          3                                                     4
        B            4                                                                3
        C            3          3                                                     4
        D            2          2            2         1            1       1         4
        E            2                                                                2
        F            1          1            1         1            1                 3

      Australian DRGs are split in different ways, but in versions 4 and 5 the splits are mostly made
      on the basis of the PCCL score (as shown in the rightmost column of Figure 6). Some
      examples are given in Figure 7.

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      Figure 7: selected DRGs showing PCCL levels

                                                                                               Cost    ALOS
     DRG                                     DRG Description                                                    PCCL
                                                                                              weight   (days)

    B01Z    Ventricular shunt revision                                                          2.79     6.34        *
    B62Z    Admit for apheresis                                                                 0.29     1.02        *
    B73Z    Viral meningitis                                                                    0.98     3.37        *
    D01Z    Cochlear implant                                                                    7.37     1.34        *

    E60A    Cystic fibrosis with catastrophic or severe complications or comorbidities          4.23    12.15      3, 4
    E60B    Cystic fibrosis without catastrophic or severe complications or comorbidities       3.18     9.51   0, 1, 2

            Transurethral prostatectomy with catastrophic or severe complications or
    L05A                                                                                        3.53    11.16     3, 4
            Transurethral prostatectomy without catastrophic or severe complications or
    L05B                                                                                        1.40     3.88   0, 1, 2

    B02A    Craniotomy with catastrophic complications or comorbidities                         9.26    19.52        4
    B02B    Craniotomy with severe or moderate complications or comorbidities                   5.44    11.08     2, 3
    B02C    Craniotomy without complications or comorbidities                                   4.10     7.29     0, 1

    B70A    Stroke with catastrophic complications or comorbidities                             4.76    18.84         4
    B70B    Stroke with severe complications or comorbidities                                   2.59    10.74         3
    B70C    Stroke without catastrophic or severe complications or comorbidities                1.68     6.80   0, 1, 2

    L60A    Renal failure with catastrophic complications or comorbidities                      3.58    12.56         4
    L60B    Renal failure with severe complications or comorbidities                            1.93     7.41         3
    L60C    Renal failure without catastrophic or severe complications or comorbidities         1.01     4.01   0, 1, 2

            Coronary bypass, with invasive investigative procedure, with catastrophic
    F05A                                                                                       10.44    17.31        4
            complications or comorbidities
            Coronary bypass, with invasive investigative procedure, without catastrophic
    F05B                                                                                        7.84    13.01   0 to 3
            complications or comorbidities
            Coronary bypass, without invasive investigative procedure, with catastrophic
    F06A                                                                                        6.43     9.79        4
            complications or comorbidities
            Coronary bypass, without invasive investigative procedure, without catastrophic
    F06B                                                                                        4.92     7.17   0 to 3
            complications or comorbidities

            Vaginal delivery, with operating room procedure, with catastrophic or severe
    O02A                                                                                        1.97     5.07      3,4
            complications or comorbidities
            Vaginal delivery, with operating room procedure, without catastrophic or severe
    O02B                                                                                        1.49     3.63   0, 1, 2
            complications or comorbidities
    O60A    Vaginal delivery, with catastrophic or severe complications or comorbidities        1.63     4.67     3, 4

    O60B    Vaginal delivery, without catastrophic or severe complications or comorbidities     1.16     3.07   0, 1, 2

    O60C    Vaginal delivery, single birth, uncomplicated                                       0.99     2.36        0

    E66A    Major chest trauma, age 69 or over AND with complications or comorbidities          2.27    10.31   1 to 4
    E66B    Major chest trauma, age 69 or over OR with complications or comorbidities           1.18     4.50   0 to 4
    E66C    Major chest trauma, age under 70, without complications or comorbidities            0.64     2.23        0

    J06A    Major procedure for malignant breast conditions                                     1.92     3.95        *
    J06B    Major procedure for non-malignant breast conditions                                 1.56     2.06        *

      The first four examples are AR-DRGs that are not split at all. These DRGs are defined
      exclusively by the principal diagnosis (plus the most costly procedure if any).

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      Then there are several AR-DRGs that are split using only the significant secondary diagnoses
      (complications and comorbidities). The AR-DRG for cystic fibrosis is split into two,
      depending on the PCCL level. The other examples are split into three according to PCCL

      There are two AR-DRGs for coronary bypass (with and without an invasive investigative
      procedure). Both are split into two using PCCL levels.

      Vaginal deliveries are split using both PCCL levels and presence or absence of an operating
      room procedure. The AR-DRG for major chest procedures is split using both age and PCCL

      It can be seen from these few examples that there is no simple model for the splitting of AR-
      DRGs. The most common way is to split using PCCL levels only. However, there are AR-
      DRGs that are split using both PCCL levels and another indicator of cost.

      Even where PCCL levels are used, there are several different combinations. Sometimes level
      4 (catastrophic) defines a separate DRG, and in other cases levels 3 (severe) and 4
      (catastrophic) are combined to form a single DRG.

      The various approaches were determined empirically. In other words, a large database was
      analyzed and the splits that were most effective for each AR-DRG determined how the DRGs
      would be formed. Australia was fortunate to have a large database with relatively accurate
      diagnoses and procedures data, and a history of routine annual cost surveys. Even then, the
      results of statistical analysis were presented for evaluation to various clinical expert

      It is therefore not surprising that AR-DRGs have been rated highly by health care providers
      (and especially medical specialists) who argue they treat more complicated patients. It simply
      makes no sense to clinicians to take account of only one diagnosis after the principal

      3M (which is a major international provider of DRG variants as noted below) has argued that
      it was right in choosing not to take the same approach of counting the number of CCs in its
      variants (such as APR-DRGs) on the grounds that the data in many countries were still
      deficient. The company noted that the combinatory model may be worthwhile in Australia,
      where there is a relatively complete recording of secondary diagnoses, but it would not be
      helpful for countries like Germany or Switzerland because the average number of recorded
      diagnoses is lower.

      This is a poor argument. First, the completeness of recording is certain to improve once
      hospitals are being paid on a DRG basis – as has been the case in Australia. Second, even if
      there are unrecorded diagnoses, it will always make sense to count those that are present in a
      clinically logical way.

      The more sophisticated method of use of CCs meant that several splits on age (which has
      been regarded as a proxy for severity) could now be eliminated. This was the main reason
      why the number of classes fell from 667 in version 3 to 661 in version 4. One side-effect of
      reduction of use of age splits is that there are fewer pediatric classes.

      Changes of detail included the re-structuring of MDC 2 (eye diseases and disorders) and
      MDC 22 (burns). The multiple trauma component of MDC 21 (injuries, poisonings and toxic
      effects of drugs) was also re-structured.

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      Among other changes, angioplasty has been separated from transvascular percutaneous
      cardiac intervention and split by AMI and stents. Skin disorders have been grouped into
      severe, moderate and minor. The DRG for dementia and global disturbances of cerebral
      function has been split to create a new DRG for delirium. Other revisions affected the
      assignment of uterine and adnexa procedures, stroke, joint and limb reattachment, and
      neonatal classes. New classes were created for electroshock therapy, microvascular tissue
      transfer, and opioid use.

      Some changes were a consequence of the upgrading of diagnostic and procedure coding to
      ICD10-AM. For example, three new groupings have been created for head injury
      (intracranial injury, skull fractures, and other).

      Data requirements for version 4 were much as before. There were only two significant
      changes. The 'intended same day patient' variable was replaced by actual same day. A new
      variable, mental health legal status, as added to split two of the classes in MDC 19 (mental
      diseases and disorders).

      Finally, the numbering method was changed. The new method is structured as ADDS where
      A roughly matches the MDC, DD indicates the diagnosis or procedure cluster, and S
      indicates the severity level.

      With respect to the first character, A relates to the Pre-MDC DRGs, B contains nervous
      system DRGs (MDC 01), C contains ophthalmological DRGs (MDC 02), and so on to Z for
      DRGs relating to other health factors (MDC 23). The edit DRGs are prefixed by 9. These
      new initial characters do not replace MDCs as labels.

      The second and third characters, DD, comprise a two-character label for the diagnosis and
      procedure clusters (also known as adjacent DRGs). In most cases, range 01-39 indicates the
      surgical partition, range 40-59 indicates the 'other' partition, and range 60-99 indicates the
      medical partition. Thus 01 will be the first surgical adjacent DRG in the MDC, 02 the second
      surgical adjacent DRG, and so on. 40 indicates the first 'other adjacent DRG in the MDC, and
      so on. 60 indicates the first medical adjacent DRG in the MDC, 61 the second, and so on.

      The fourth character, S, is a split indicator which orders the DRGs within an adjacent DRG on
      the basis of resource consumption. It can use any combination of the variables PCCL, age,
      mode of separation, same-day field, malignancy (and in some instances secondary
      diagnosis or procedure). For example, A indicates the highest resource DRG within the
      adjacent DRG, B the second highest, and so on. The character Z indicates there is no split of
      the adjacent DRG. Examples of complete DRG numbers are as follows:

              TIA and precerebral occlusion (the ninth adjacent DRG in the medical partition of
              MDC 01) becomes DRGs:

                      B69A TIA and precerebral occlusion w catastrophic CC
                      B69B TIA and precerebral occlusion w severe CC
                      B69C TIA and precerebral occlusion w/o catastrophic or severe CC

      Non-major fractures of femur (the second adjacent DRG in the medical partition of MDC 08
      which has no splits) becomes DRG I61Z (Other femoral fractures) and kidney transplant (the
      first adjacent DRG in the surgical partition of MDC 11) becomes DRGs L01A (Kidney
      transplant with catastrophic or severe complications or comorbidities) and L01B (Kidney
      transplant without catastrophic or severe complications or comorbidities).

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            AR-DRG Version 5

        AR-DRG version 5.0 was released in 2003 and began to be widely used in 2004. It retains the
        AR-DRG structure of version 4 classifications, but incorporates major changes to MDC 14
        (obstetrics), new same-day DRGs and revised splits in a number of Adjacent DRGs based on
        analysis of patient-level costing studies. Version 5.0 uses third edition ICD10-AM codes.

        AR-DRG version 5.1 was released in October 2004. It is only a minor update to the
        classification, in that it makes use of ICD10-AM Fourth Edition codes. The DRG classes
        themselves are unchanged.

        A complete list of the DRGs is shown in Attachment 3 to this document. The first column
        shows the DRG code, which is a mix of numbers and letters in the same way as for version 4.
        The second column gives a short description of the DRG. There are several abbreviations. For
        example, 'CCs' refers to significant complications or comorbidities, and Dx stands for
        diagnosis. The third column shows the cost relativity (the average cost of each DRG relative
        to the average cost for all DRGs (which is set at 1.00). The last column is the average length
        of stay in days.

        3.3.5.     Other DRG variants
Many countries have chosen to use a US variant, without change. The HCFA variant has been
particularly widely used because of the absence of copyright on the logic.

However, several other countries have developed their own versions because they considered US
variants to be weak in logic (especially the HCFA variant) or otherwise unsuitable for a combination
of reasons.

For example, the United Kingdom has established a variant called Healthcare Resource Groups, and is
quite different in many respects from all US-developed variants such as HCFA-DRG, AP-DRG, and
R-DRG. The Austrian variant, Leistungsgerechte Diagnosefallgruppen, is based on HCFA-DRGs but
includes several significant local modifications.

In contrast, Canada's variant, which is called Case Mix Groups, is very similar to HCFA-DRGs. The
same may be said of the GHM classification, France's variant called Group Homogènes de Malades,
and of the variant used in Italy.

        3.3.6.     3M variants (AP-DRGs, APR-DRGs, and IAP-DRGs)
The international commercial company 3M has been responsible for maintaining AP-DRGs on behalf
of New York State. It has used this opportunity to develop some extensions including All Patient
Refined DRGs (APR-DRGs), which use the refined DRG logic of 3- and 4-part splits on CCs, but
building on the AP-DRG logic.

Another extension owned by 3M is called International All Patient DRGs (IAP-DRGs). In spite of the
name, IAP-DRGs are hardly used internationally. Some of the reasons are explained in
documentation relating to the decision of the German government in 2000 to select the Australian
DRG variant in preference to several other leading candidates.

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In this brief Section, we describe the purpose and nature of DRG Grouper software. Then we describe
the main ways of entering data and obtaining results. Finally, we note some aspects of particular
importance to Macedonian health sector managers in the near future.

         4.1. The purpose and nature of DRG Grouper software
A DRG Grouper software package (Grouper) takes the DRG source data for a case and outputs the
result – the DRG assignment. By case, we mean an inpatient episode of care from admission to
discharge. By DRG assignment, we mean the result expressed as one of about 650 AR-DRG classes
of inpatient care – such as normal childbirth or carpel tunnel release.

By DRG source data, we mean the standard data that are required to determine the DRG assignment.
For the Australian DRG classification, the standard data are as follows:

     1. Principal diagnosis
     2. Other diagnoses affecting treatment
     3. Significant procedures (mostly those that are performed in an operating room)
     4. Patient’s age and gender
     5. Destination after discharge (home, another hospital, etc)
     6. Admission weight of babies.

Other data elements may be entered to the DRG Grouper by the user, for the sake of identification and
reporting. For example, they might include the patient’s name and identification number, and
admission date. These kinds of data elements are not required in order to assign the case to a DRG,
but they may be useful when reports of the results are produced.

         4.2. Features of good Grouper software
 The basic functions of a DRG Grouper are obvious from the previous section namely, acceptance of
the data required for DRG assignment, and outputting of the DRG for the case. However, there are
several other tasks that a good DRG Grouper normally supports, including the following:
     •   Checking of the DRG source data and reporting to the user where source data are incorrect
         (such as an invalid ICD10-AM diagnosis code)
     •   Checking of the DRG source data and reporting to the user where source data fields are
         inconsistent (such as an ICD10-AM diagnosis code that is inconsistent with the gender of the
     •   Checking of the DRG source data and reporting to the user where source data fields are
         insufficient to ensure the case can be allocated to a DRG (such as where an ICD10-AM
         diagnosis code is insufficiently specific)
     •   Reporting of results with additional information from stored tables (such as reporting of the
         cost relativity for the assigned DRG or providing a full description of the assigned DRG).

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A good DRG Grouper will have several additional capabilities. Among the most important are the

            Easy ways of entering the source data

      They will include batch mode entry (meaning a file of DRG source data for many cases at
      once). They will also include interactive mode (meaning that the user can enter the data for a
      case directly to a data entry screen and obtain immediate onscreen feedback on the DRG
      assignment or on problems with the source data).

      An interactive screen is shown in Figure 8. The principal diagnosis is E1171 (Type 2 diabetes
      mellitus with multiple microvascular complications). The DRG is K60B (Diabetes without
      catastrophic or severe complications or comorbidities). Note the box on the bottom left side
      labeled ‘GST’. This displays a code indicating type of error if the assignment process cannot be

      Note also the box labeled ‘Controls’ in the lower right part of the screen. This box allows the
      user to enter case one by one, activate the grouping process, move forwards and backwards to
      check the cases that have been entered, save and report the results, and so on.

      Figure 8: the interactive screen for a DRG Grouper

            Easy ways of retrieving the results of DRG grouping

       A good DRG Grouper will have several ways of outputting the results – to the screen in
       interactive mode, and to various forms of electronic media when in batch mode. Various
       kinds of file formats will be available, and the user will be able to specify layouts.

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        The DRG Grouper software should be able to work on all the common hardware and software
        platforms in the health system. It is usually the government’s responsibility to issue
        specifications of the platforms to be handled.

       4.3. The Macedonian Grouper
The Macedonian Government has chosen to develop its own DRG Grouper for AR-DRGs rather than
purchase an off-the-shelf AR-DRG grouper (see Figure 9). The Macedonian grouper is now
operational. It is web-enabled and is supported by a comprehensive user guide. The main screen of the
grouper is shown in Figure 9 and includes the following data entry fields: patient name, ID number,
date of admission, date of discharge, gender, age, weight on admission, informed consent, type of
discharge, use of ventilation, invoice price, principal diagnosis, additional diagnoses and procedures.

Figure 9: Main screen of the Macedonian grouper

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Basic ideas of disease classification emerged from medical professionals in the eighteenth century. A
classification of causes of death was adopted by the International Statistical Congress in 1855 and
revised several times. From 1900, classifications of diseases for morbidity reporting purposes were
integrated into the causes of death classification. This classification was modified six times before
being adopted internationally in 1948 by the First World Health Assembly. Since then, it has been
updated several times. The current version is ICD-10 (The International statistical classification of
diseases and related health problems), and was formally adopted by WHO member states in 1993.

In Australia, agencies have been recording cause of death using the International classification of
diseases (ICD) and its predecessors since 1907. Australian hospitals and health services have
collected ICD data on diagnoses and procedures since 1968.

There is no international standard classification of procedures. There have been some regional
agreements (whereby neighbouring countries used the same classification) but most countries have
used their own classifications. Some countries have not even had a single national classification.

The most widely used procedure classification has been ICD9-CM Procedures. This was introduced in
the USA to create a national standard together with its equivalent ICD9-CM Diagnoses classification.
Many other countries (including Australia) adopted ICD9-CM for both diagnoses and procedures, but
few European countries have used it.

In the last decade, a competitor to ICD9-CM has emerged as a possible international standard, it is
ICD10-AM. Like ICD9-CM, it includes both diagnosis and procedure classifications. It has been
adopted for use in Macedonia, and it is the basis for the Australian DRG classification. It therefore
deserves special attention in this document.

         5.1. Development of ICD10-AM
In 1995, the Australian government decided to develop its own diagnosis and procedure
classifications. There were three main reasons:
     •   Australia would no longer be dependent on the USA for updates to classifications (and this
         was considered important because the USA has different hospital payment methods such as
         separate payment for hospitals and the doctors).
     •   Australian clinicians could be more involved in reviewing and updating clinical
         classifications, and therefore more interested in improving clinical data.
     •   It would provide the opportunity to merge the government hospital classifications with those
         used in private health care systems (including private doctor payment systems which are
         based on a classification termed the Commonwealth Medicare Benefits Schedule).

The starting point for classification development comprised ICD-10 (issued in 1993 as noted above),
the ICD9-CM Diagnoses and Procedures classifications, and the Commonwealth Medicare Benefits
Schedule. A network of 21 Clinical Coding and Classification Groups was established, which worked
for over two years to create the starting version of ICD10-AM. A new agency, the National Center for
Classification in Health (NCCH), was established to maintain the new classifications.

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Several important changes were made in ICD10-AM compared with the starting classifications. A few
are listed below:

           • Improved classification of post-procedural disorders
           • Expansion of substance abuse and dependency codes
           • Site classification of most musculoskeletal conditions
           • Greater specification of injuries and trauma
           • External cause codes that include place of occurrence and activity

           • Overall improvement in terminology
           • Greater detail in cardiac codes, particularly pacemaker and stents
           • Expansion of codes for grafts, flaps and micro-vascular repair
           • Greater specification of size and number of lesions (eg, number of calculi, size of
           • Increase in laparoscopic surgery codes.

The ICD10-AM disease codes are alpha-numeric with 3 to 5 characters. For example, the code for
Ross River disease is B33.1. The procedure codes are numeric and have 7 characters. For example,
the code for endoluminal repair of aneurysm is 90228-00.

The first version of ICD10-AM was introduced in 1998 in four Australian states, and the remaining
states started to use it in 1999. The general policy is to update ICD10-AM every two years. The actual
timings of updates are shown in Figure 10.

The update process involves national consultation with clinicians and clinical coders over an 18
month period. Public submissions are encouraged by mail or through a website, and each Australian
state has its local coding committee.

There were relatively few changes between Versions 1 and 2 of ICD10-AM. Many more changes
were made for Version 3 that mostly concerned abuse, additional diagnoses, anaesthesia, arterial
disease, diabetes, drug resistance, external cause, same-day endoscopy, sepsis, and ventilation.

        Figure 10: Coding systems in Australia since 1994

          Year                ICD version used in Australia
          1994                ICD-9-CM US version
          Australian modification of ICD-9-CM was developed in 1994
          1995                ICD-9-CM First Edition
          1996                ICD-9-CM Second Edition
          1997                ICD-9-CM Second Edition
          1998                ICD-10-AM First Edition (4 states)
          1999                ICD-10-AM First Edition (all states)
          2000                ICD-10-AM Second Edition
          2001                ICD-10-AM Second Edition
          2002                ICD-10-AM Third Edition
          2003                ICD-10-AM Third Edition
          2004                ICD-10-AM Fourth Edition

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           2006                ICD-10-AM Fifth Edition

There were large numbers of code modifications. For example, the codes for anesthesia were revised
to provide a more concise and user-friendly structure. New codes were created, and a different
structure of codes was introduced comprising four main groups:

        [1333]    Analgesia and anaesthesia during labour and caesarean section
        [1909]    Conduction anaesthesia
        [1910]    Cerebral anaesthesia
        [1912]    Post-procedural analgesia.

Codes were deleted, and in Version 3 there was only one code for general anaesthesia. No distinction
was made on the basis of method of induction or maintenance of the anaesthesia.

Similarly, reductions in codes were made for sedation. No distinction was made between the method
of sedation or the person administering the sedation. The codes for regional blocks (for anaesthesia)
were divided on the general anatomical area of the administration of the block (nerve of head or neck,
nerve of trunk, nerve of upper limb, nerve of lower limb, and so on).

Important changes to diabetes coding included a new category for impaired glucose regulation. A new
code was introduced for diabetes mellitus with poor control, and new fifth-character subdivisions
were made for diabetes in pregnancy to reflect insulin treatment. Several diabetes codes were deleted.

In the Fourth Edition (released in 2004), 123 new diagnosis codes were added and 295 new procedure
codes were added. 13 diagnosis codes were deleted and 166 procedure codes were deleted. In total,
ICD10-AM Version 4 had 16,013 diagnosis codes and 6055 procedure codes.

        5.2. The key coding rules for DRG classification
It is far from easy to code correctly for the purpose of ensuring a patient’s episode of care is assigned
to the correct DRG.

The error levels have been reduced in several countries by a variety of actions including payment
penalties, training, and improved documentation and computer support. Australia produces a
publication called “The Australian Coding Standards” that gives detailed advice on the most
problematic aspects of coding.

As for ICD10-AM itself, there are continuing changes in the Australian Coding Standards. For
example, for Version 3 of the Australian Coding Standards, 19 standards were deleted, 68 were
amended to provide clarity, and 15 new standards were added.

For example, new coding standards were introduced for medications (advice on coding conditions that
require ongoing medication), multiple coding (advice about coding of diagnoses when they do not
meet the criteria of an additional diagnosis) and assessments (advice about coding conditions
documented by an anesthetist during preoperative assessments or documented by other clinicians in
an admission assessment).

In fact, most of the errors do not concern complicated cases but a failure to understand and apply a
few simple rules that affect most episodes of care.

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            Completeness and timeliness of documentation

        Information should be recorded as soon as possible. If it is delayed, it might not be
        remembered correctly, or it might be forgotten altogether.

            Use of commonly accepted terminology and abbreviations

        Terms and abbreviations should be used carefully to increase the efficiency and accuracy of
        the clinical record – and hence the clinical coding. Abbreviations that could have a double
        meaning should be spelled out, e.g. PE – pulmonary embolism, or pleural effusion; CHD –
        congenital hip dislocation, or congenital heart disease.

            Legibility of recording

        Communication with other health care providers and users of the information, such as clinical
        coders, is enhanced by legible documentation. If a clinician’s hand-writing is difficult to read,
        the clinical coder should point this out to that clinician – and raise the issue in a clinical team
        meeting if the problem is not resolved.

            Specificity of documentation and causal links

        Specificity of documentation improves the accuracy of clinical coding and DRG assignment.
        Diagnostic statements that draw conclusions between history, examination and findings are
        useful. Documentation of causal links between conditions eliminates the risk of the clinical
        coder overlooking the link or having to consult the clinician for clarification.

        Look at the examples in Figure 11. In each case, the documentation on the left is inadequate,
        and could lead to incorrect coding, incorrect assignment to a DRG, and financial loss. The
        additional (more useful) information on the right should be known by the responsible doctor
        and therefore it should be easy to record.

Figure 11: examples of good and bad documentation

           Inadequate documentation                                Better documentation
      Fractured arm                                 Fractured left distal radius and ulna
      Ca bowel                                      Adenoca. of transverse colon
      Anaemia                                       Post-op anaemia due to acute blood loss
                                                    Anaemia due to menorrhagia
                                                    Iron deficiency anaemia
      Assistance with activities of daily living    Assistance with ADLs due to dementia
      COPD                                          Smoking-related COPD
      Neck pain following fall                      Neck injury following fall down stairs whilst working at
                                                    the cinema
      OD Temazepam                                  Accidental overdose of temazepam
                                                    Attempted suicide by overdose of temazepam

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        5.2.1.     Understanding the manuals
The diagnosis and procedure coding manuals mostly follow international conventions, including those
in the Australian manuals. It is important that anyone who does coding understands the conventions.
For example, there are methods of structuring the information in the manuals such as:

    •   Exclusion Notes - when a particular rule does not apply in all circumstances)

    •   Not otherwise specified (NOS) - meaning what should be done if there is incomplete
        information to allow the assignment of a detailed code

    •   Not elsewhere classified (NEC) - meaning a code should be used only if a more precise term
        cannot be found elsewhere in the classification.

Careful study of the manuals is essential to good recording and coding practices. All concerned staff
need to be given training by an experienced person.

        5.2.2.     The recording and coding of principal diagnosis
The principal diagnosis is the single most important data element when coding for DRG purposes.

        “The diagnosis established after study to be chiefly responsible for occasioning the
        patient's episode of care in hospital (or attendance at the health care facility).”

There are two important aspects to this definition. First, we are looking for the diagnosis that was
most responsible for the decision to admit the patient.

For example, if the patient was admitted for tonsillectomy and then had a stroke post-operatively, the
acute tonsillitis would be the principal diagnosis. This is true, even if care for the stroke was more
costly to treat.

One way to see this is through understanding the difference between a comorbidity and a
complication. A comorbidity is a condition that exists at the time of admission, and a complication is
a condition that arises during the period of hospitalization. A complication can never be the principal
diagnosis, because it could not have been anticipated. It could not have been the reason why the
patient was admitted.

The second important aspect is the phrase ‘after study’. This means selection of the principal
diagnosis should take account of all the available information – including information that was not
available at the time of the admission. The information might be obtained through study of
assessments and evaluations, specialist consultations, physical examinations, diagnostic tests or
procedures, any surgical procedures, and any pathological or radiological examination.

The condition established after study may or may not confirm the preliminary diagnosis recorded at
the time the patient was admitted. For example, the symptoms might lead to a decision to admit for a
suspected condition, but subsequent pathology tests show that the symptoms relate to a different

A related idea is that the underlying condition should usually be selected as the principal diagnosis.
Consider this example.

The patient arrives at the hospital with seizures. The patient had not previously been treated for
seizures. A CT scan revealed a large brain tumor. This was not suspected when the decision was made

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to admit the patient. After study, we conclude the tumor was the underlying cause of the symptoms
that led to the decision to admit. Therefore the principal diagnosis should be ‘brain tumor’.

There are many other possibilities that cause problems for inexperienced coders. Fortunately, the
Australian Coding Standards provide advice on all the common problems of selection of the principal
diagnosis. For example, advice is given on the following circumstances:

    •   There are two or more conditions that possibly meet the definition of principal diagnosis
        (such as where it was a combination of factors that led to the decision to admit). This is a
        common situation for elderly frail patients who have multiple problems that interact.

    •   Where it is not possible to make a positive diagnosis before the patient is discharged (either to
        home or to another health care facility).

Finally, it is important to understand the possible consequences of selecting the wrong principal

         5.2.3.      Impact of incorrect selection of principal diagnosis
The way the principal diagnosis is selected can also have a large effect on the payment the hospital
receives. This is illustrated in Figure 12, where there are two different selections of the principal

In the first case, the principal diagnosis was recorded as ‘Unstable angina’ and in the second case the
responsible doctor recorded ‘Acute transmural myocardial infarction of inferior wall’.

The payment is 50% higher in the second case. This is mainly because unstable angina is a less
specific diagnosis. The problem is exacerbated in this case because the imprecise diagnosis has led to
selection of an incorrect procedure code.

Figure 12: the effects of two different selections of the principal diagnosis

     Age                        65 years
     Gender                     Male

     Option #1: Unstable angina as the principal diagnosis
     Principal diagnosis        I20.0 Unstable angina
     Procedures                 35310-00 Percutaneous insertion of 1 transluminal stent into single coronary artery
     MDC 5                      Diseases and disorders of the circulatory system
     DRG                        F15Z Percutaneous coronary angioplasty minus AMI plus stent
     AR-DRG cost weight         1.84
     ALOS                       2.60 days

     Option #2: AMI as the principal diagnosis
     Principal diagnosis        I21.1 Acute transmural myocardial infarction of inferior wall
     Procedures                 35310-00 Percutaneous insertion of 1 transluminal stent into single coronary artery
     MDC 5                      Diseases and disorders of the circulatory system
     DRG                        F10Z Percutaneous coronary angioplasty plus AMI plus stent
     AR-DRG cost weight         2.76

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     ALOS                      4.99 days

        5.2.4.      The recording and coding of additional diagnoses
Additional diagnoses are simply those that are in addition to the principal diagnosis. The complete
definition is as follows:

        “A condition or complaint either coexisting with the principal diagnosis or arising during
        the episode of care or attendance at a health care facility.”

The main challenge for coders is that of knowing when the additional diagnosis is sufficiently
important to merit being recorded and coded. There are risks in coding too few diagnoses including
the following:
    •   A diagnosis might be important for future care of the patient, or for later research
    •   A diagnosis might move the patient to a higher-paying DRG.

But there are also some possible disadvantages in coding too many diagnoses, including the
    •   An unnecessary or irrelevant diagnosis might cause confusion when care is provided to the
        patient in future
    •   An unnecessary or irrelevant diagnosis might be questioned by the paying agency and lead to
        financial penalization on the grounds that the hospital was trying to cheat.

There is often room for doubt. However, the risks of errors can be minimized if the following simple
questions are asked.

Did the additional diagnosis actually affect the care of the patient during the stay in hospital in terms
of requiring:
    • therapeutic treatment?
    • diagnostic procedures?
    • increased nursing care and monitoring?

Was the actual care provided affected by the presence of the diagnosis, thus leading to:
   • a significant increase in cost?
   • a prolonged length of stay?

Consider a simple example. The patient is admitted to hospital for varicose veins surgery. The patient
is known to have hypertension. However, the normal method of treatment for varicose veins was
followed. The patient continues to take medications for hypertension in the same way as before
admission. In this case, the hypertension should not be coded (although it might be noted in the
patient’s file).

Figure 13 shows the potential for financial effects according to the way that additional diagnoses are
recorded and coded.

The key difference was that diagnosis B96.2 (E. coli as the cause of diseases classified to other
chapters) was recorded and coded in the second case. This had the effect of moving the patient from
DRG G02B (Major small and large bowel procedures without catastrophic complications or
comorbidities) to DRG G02 A (Major small and large bowel procedures with catastrophic

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complications or comorbidities). The second DRG has a payment rate that is more than twice that of
the first DRG.

Figure 13: an example of the effects of the coding of additional diagnoses

     Age                       55 years
     Gender                    Female

     Case 1: under-reporting
     Principal diagnosis       C18.2 Malignant neoplasm of ascending colon
     Additional diagnoses      N39.0 Urinary tract infection, site not specified
     Procedures                32003-01 Right hemicolectomy with anastomosis
     MDC 6                     Diseases and disorders of the digestive system
     DRG                       G02B Major small and large bowel procedures without CCC
     AR-DRG cost weight        3.01
     ALOS                      8.95 days

     Case 2: more complete reporting
     Principal diagnosis       C18.2 Malignant neoplasm of ascending colon
     Additional diagnoses      N39.0 Urinary tract infection, site not specified
     Additional diagnoses      B96.2 E. Coli as the cause of diseases classified to other chapters
     Procedures                32003-01 Right hemicolectomy with anastomosis
     MDC 6                     Diseases and disorders of the digestive system
     DRG                       G02A Major small and large bowel procedures with CCC
     AR-DRG cost weight        6.48
     ALOS                      17.86 days

This is an extreme example. In most cases, the addition of one more additional diagnosis might have
no effect because there are already other additional diagnoses that move the patient to the highest-
paying DRG in the A-DRG. In many cases, the additional diagnosis will have no effect, regardless of
the presence or absence of other additional diagnoses. Many diagnoses are not defined to be
significant complications or comorbidities for particular DRGs. Many AR-DRGs are not affected at
all by the additional diagnoses.

In total, the best approach is to follow the rules listed above. Over-coding might not lead to any
additional payment, but it is almost certain to lead to financial penalties IF it is a consistent policy of
the hospital or department rather than a simple mistake.

        5.2.5.       The recording and coding of procedures
A procedure is defined in several different ways depending on the context. For the purpose of
assignment to a DRG, the definition is as follows:

    A procedure is a clinical intervention that meets one or more of the following criteria:
        • it is surgical in nature
        • it carries a procedural risk

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        •   it carries an anaesthetic risk
        •   it requires specialised training
        •   it requires special facilities or equipment only available in an acute care setting.

All significant procedures undertaken from the time of admission to the time of separation should be
coded. This includes diagnostic and therapeutic procedures.

The circumstances are different from those for additional diagnoses because there are no financial
advantages resulting from over-reporting and over-coding. This is because only one procedure
determines the DRG. If several procedures are listed, the DRG Grouper software finds the one that is
the most expensive and then ignores all the others. All you need to do to ensure maximum payment is
to record and code the most expensive procedure. If you are unsure, you can record and code several
of them, to make sure you have the one that the DRG Grouper considers the most expensive.

However, there are good clinical reasons to record procedures because they might be important for
future care of the patient or for research. It is therefore sensible to record and code procedures in the
following order:
    •   procedures performed for treatment of the principal diagnosis
    •   procedures performed for treatment of an additional diagnosis
    •   diagnostic or exploratory procedures related to the principal diagnosis
    •   diagnostic or exploratory procedures related to an additional diagnosis for the episode of care.

Some kinds of procedures are normally not coded because they are usually routine in nature,
performed for most patients, or they can occur multiple times during an episode. Examples of such
procedures are application of plaster, dressings and ultrasounds. Post-procedural urinary
catheterisation would not be coded unless the patient is discharged with a catheter in situ. On the
other hand, Suprapubic catheterisation, however, should always be coded.

        5.3. DRG data analysis
DRG data is analysed so that appropriate calculations of performance can be made and so that
feedback can be provided to hospitals on their individual performance and the quality of their coding
practice. The analysis is in two forms. In the first instance the quality of the coding and hospital
complexity for each hospital and clinic will be evaluated. The second part of the analysis will be the
analysis of hospital performance. Below is a description of the indicators that can be used to compare
hospitals’ coding and performance.

        5.3.1.      Analysis of coding quality and DRG complexity
The following elements will be reported on to inform on the quality of DRG coding by the hospitals:
    •   Number of invoices (records) entered vs successfully grouped – in Macedonia’s case, since
        the grouping is being undertaken on the web by hospitals, it is unlikely that the hospital
        coders will allow an ungroup record to pass into the system.
    •   Casemix weighted output for each hospital
    •   Average Hospital Cost weight (Casemix index or CMI)
    •   PCCL distribution: - how many DRGs in each CC category (A,B,C, D or Zero) eg:
            q    B70A - Stroke with catastrophic CC

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            q    B70B - Stroke with severe CC
            q    B70C - Stroke without catastrophic or severe CC
    •   Error DRGs (See section below)
    •   Grouper status (See section below)
    •   Most incorrectly entered diagnosis
    •   Average number of diagnoses per record entered related to hospital cost weight
    •   Average number of procedures related to hospital cost weight (CMI)

        Error DRGs

        Hospital records that contain clinically atypical or invalid information are assigned to one of
        six error DRGs:

        901Z – Extensive OR Procedure unrelated to principal diagnosis
        902Z – Non-Extensive OR Procedure unrelated to principal diagnosis
        903Z – Prostatic OR Procedure unrelated to principal diagnosis
        960Z – Ungroupable
        961Z – Unacceptable principal diagnosis
        963Z – Neonatal diagnosis not consistent with age/weight

        These Error DRGs fall into three groups;
               Group 1 – 901Z, 902Z and 903Z are used when all OR procedures are unrelated to
               the MDC of the patient’s PDX.
               Group 2 – 961Z and 963Z are used when the PDX will not allow the episode to be
               assigned to a clinically coherent DRG (eg. An ICD10-AM code may be given as
               PDX, when ACS states that the code is unacceptable as a PDX)
               Group 3 – 960Z is used when the PDX is invalid, or when other essential
               information is missing or incorrect.

        In general, Group 1 relates to the method of classification, Group 2 relates more to coding
        standards, while Group 3 relates to coding quality.

        Grouper Status

        When the grouping process is complete, each record is assigned a grouper status (GST) code.
        The GST code will be zero unless the grouper in trying to assign a record to a DRG
        encounters missing or invalid information. In these cases the record is assigned to DRG 960Z
        Ungroupable with a non-zero grouper status indicating the type of error. Table 14 below
        provides details of each GST.

        5.3.2.     Analysis of hospital performance
This analysis will compare the hospital’s weighted output against the facilities and resources it uses .
Attachment 2 includes a hospital efficiency measurement questionnaire that can be used to collect
data for this purpose. The following elements can be reported and analysed:
    • Casemix weighted output

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    •   Hospital Cost weight
    •   Inpatient budget

Figure 14: Description of grouper status codes

    Status Code                  Description                                Conditions
         00          Normal Grouping                 Normal grouping – includes assignments to all Error
                                                     DRGs except 960z
          01         Invalid or missing principal    Invalid or missing principal diagnosis
          02         Diagnosis code cannot be used   1. a code in the range U50-Y98 used as principal
                     as principal diagnosis              diagnosis, or
                                                     2. the principal diagnosis does not belong to any
          03         Record does not meet criteria   Principal diagnosis does not belong to any DRG, or
                     for any DRG                     the record cannot be assigned to a DRG by the logic
          04         Invalid age                     Age cannot be derived in the valid range
          05         Invalid sex                     Invalid sex or sex conflict with principal diagnosis
          06         Invalid mode of separation      Invalid mode of separation
          07         Invalid admission weight        When a patient’s age is entered or calculated as 365
                                                     days or less, and the value in the admission weight is
                                                     either missing or invalid and the principal diagnosis
                                                     is a neonatal diagnosis
          08         Invalid length of stay          LOS cannot be derived from the data
          09         Invalid same day status         Same day status cannot be derived form the data

    •   Cost per casemix-adjusted inpatient admission
    •   Numbers of doctors
    •   Numbers of nurses
    •   Numbers of pathology services
    •   Numbers of imaging services
    •   Average length of stay per DRG
    •   Number of cases of same-day discharge (one day surgery)
    •   Number of beds
    •   Utilisation rates
    •   Number of admissions ending in referrals to higher level hospitals
    •   Number of admissions ending in death
    •   Quality statistics such as: number of inpatients with multiple admissions for any diagnosis;
        number of admissions involving a hospital infection; number of surgeries involving repeated

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6.      COSTING

       6.1. Importance of Costing
The implementation of costing processes is rarely given due priority in national programs that develop
DRG based payment systems. Most attention is usually placed on coding and generation of accurate
and comprehensive DRG activity data. There are two reasons for this prioritisation. Firstly, accurate
coding is indeed a precondition to successful DRG implementation and secondly, because the
methodologies surrounding DRG activity analysis are well established as compared to costing, they
are more straight forward to implement. In the case of AR-DRGs for example, if difficulties with
coding or activity analysis are encountered, the extensive Australian DRG documentation can be
rereferred to for assistance.

Costing of healthcare products on the other hand, does not have the benefit of extensive ‘how to’
documentation that supports DRG coding practice. Because costing relies on financial data that must
be gathered from outside the DRG coding process, the costing methodology used and its accuracy will
depend on the availably and quality of these data. Costing therefore is essentially a process of
estimation. Indeed, costing, has been described as more of an art than a science. The reason for the
relative lack of attention to costing in the health system is that up until recently, health sector
managers were not required to know how much it cost to produce a defined units of healthcare.

But without the understanding of costs of production - pricing is not possible. Moreover, if prices are
difficult to determine accurately, then so is the development of payment models that fairly
recompense hospitals for what they produce. That being said, if the whole tenet of DRGs, is to pay
hospitals for output, where the total payment is calculated by multiplying volume by price, and if the
price is difficult to calculate because the costs are not know, then it follows that DRGs cannot be
effectively used as a efficiency improvement tool because it is difficult to be more efficient (that is
cheaper) if the base cost of the product is not known. To reinforce this point, Australian experience
has shown that clinician managers need valid patient costing data if they are to be asked to benchmark
their performance and improve cost-effectiveness of what they produce while maintaining and
enhancing quality.

       6.2. What do we mean by 'cost'?
Cost is different to price. In the context of this discussion, ‘cost’ can be defined as an outlay or
expenditure of money, time, labour or other resources to produce a nominated health service product,
such as a DRG, for example. The calculation of actual costs of hospital production however, is not a
simple matter and in many instances it is based on best estimates and averages across the hospital

In the process of designing a hospital payment system and deciding on the budgets and what
healthcare product should be purchased, it is important to be aware of one key constraint which is,
that health sector resources are limited and they must be made best use of to achieve the best health
outcomes within these resource limits – in other words, the purchasers of healthcare must maximise
value for money. That being said, in order that the HIF can make the right decisions about which
healthcare products should be bought, it must have accurate information on the costs of these

Moreover, to make the right choices about what to pay for, it should be recognised that there are
different ways of producing a given health product such as a hip-replacement for example, and the

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costs for each method will be different as they will call for different resource inputs. The two
approaches to delivering health products can be described as follows:

        Method 1 – Best Practice: where there are no resource constraints and we do the very best
        that current technology permits.
        Method 2 – Standard Practice: where there are resource constraints and we follow the best
        evidence based protocols within these constraints

If the purchaser is to choose which of these two products to buy, it must first know how much each
product would cost, and this requires an analysis of the costs of production.

The calculation of individual health products such as a hip replacement, requires knowledge of the
costs of the individual resource inputs that go into producing that product. The resource inputs for a
hip replacement will include doctor time, nursing time, drugs, theatre time, medical devices,
consumables, hotel etc. Once all the resource inputs have been identified, they can be costed and then
aggregated to calculate the cost of the hip replacement product. The calculation of the current costs of
health production in a hospital is called the analysis of actual average cost.

Once the input costs and the actual average costs of hip replacements being undertaken currently by
hospitals in Macedonia are known, it is then possible to estimate the costs of best practice and
standard practice hip replacement. For example, the actual average cost of a hip replacement may be
$16,500, while the estimate of the of the best practice hip replacement method may be $20,000 and
the cost of the Standard Practice method may came to $15,500. In that instance, the current cost of the
hip replacement may be more that the cost of the standard practice due to the unnecessary use of
resources but for no gain in outcome. Armed with this information, the HIF is now better placed to
make decisions as to what type of product to buy and how much to pay for it.

Because it is a starting point for all costing, this document will focus on the development of a method
of calculating the actual average costs of health service products as categorised by DRGs.

       6.3. Calculating cost weights

        6.3.1.     The concept of cost-weights
For DRGs to be used for payment purposes, a price needs to be assigned to each DRG. This is usually
done by assigning a cost relativity (or cost weight) with a base price multiplier.

A weight is a relative measure of any one, or all, of the resources consumed (e.g. bed-days, theatre
time, drugs, diagnostic procedures, physiotherapy and nursing treatment) in treating a patient. The
DRG weight for utilisation of that resource is simply a ratio that compares the average resource
utilisation within a given DRG with the average resource utilisation by all patients for all DRGs..

                              Average resource consumption per DRG
                 Weight =
                              Average resource consumption for all cases

All weight measures are translatable into dollar values, and can then be aggregated to provide overall
cost-weight ratios per DRG.

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To facilitate comparisons if this sort, and to highlight relativities rather than absolute differences in
these average weights, the figures can be further manipulated by rebasing and setting the average of
all the averages to one, and adjusting the other weight ratios relative to unit. This means that DRGs
with a weight of more than one are more costly to treat than the average patient, and DRGs with a
weight less than one are less costly than average. This practice is known as normalization. The
whole range of weights for individual hospitals can then be averaged to give a casemix index (or
average cost weight) which can then be used for comparisons between hospitals.

         6.3.2.     Developing valid cost-weights
The fundamental requirement of a DRG based payments system therefore, is the development of the
DRG cost-weights that fairly reflect the actual costs of each of the DRGs that are to be used for
payment. The development of national cost-weights independently at the beginning of an
implementation program is generally not feasible as it requires the ability to allocate actual
expenditures accurately to each patient or DRG and then comparing the costs of all DRGs to build a
cost-weight index. This patient level costing requires detail cost data that is not readily available
without costing studies.

Because of the complexity of building the cost-weights from first principles, all countries that decide
to implement DRGs in the first instance borrow a cost-weight index from other jurisdictions and over
time, adapt it so that it more accurately reflects the local cost structures. Macedonia, like other
countries in the region will also follow this approach and it is understood will utilise cost-weight
indexes used in Slovenia, Romania and Australia.

Adoption of other country cost-weights for use in Macedonia is a fairly straight forward process.
Having calculated the casemix utilising the chosen cost weight index, the results are thn rebased so
that the average DRG value is one. Specifically, the average Macedonian DRG calculated from
February activity data is 3.18 and to get the average DRG value to be one, will require that the results
are divided by 3.18.

In summary, therefore, the process of cost-weight development can follow two main paths. Firstly,
cost weights can be adopted from elsewhere and adjusted to local conditions, or secondly, they can be
estimated using local costing data, if available. In practice, DRG cost-weight development process
uses both these approaches and the actual methodology depends, to a large extent, on the availability
of good costing data.

         6.3.3.     Measuring efficiency
DRG countries have in many instances, developed their own nomenclatures as is the case in Australia
where, the cost per casemix-adjusted separation is used as an indicator of the efficiency of acute
care hospitals.

The cost per casemix-adjusted separation is a measure of the average recurrent expenditure for each
admitted patient, adjusted using AR-DRG cost weights for the resources expected to be used for the
separation. The formula used to calculate the cost per casemix-adjusted separation is:

 Cost per casemix-            Total recurrent hospital expenditure x IFRAC
 adjusted separation     =    Total separations (inpatient admissions) x Average cost weight (CMI)


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    •   recurrent expenditure - is as defined by the recurrent hospital expenditure (excluding capital
    •   IFRAC (inpatient fraction) - is the estimated proportion of total hospital expenditure that
        relates to admitted patients (inpatients)
    •    total separations - is the same as the number of inpatient admissions/discharges
    •    average cost weight (or casemix index) - is a single number representing the relative
         expected resource use for the separations (the number of casemix-adjusted separations
         divided by the number of separations).

The average cost weight (also known as casemix index or CMI) for a hospital or group of hospitals is
calculated as the number of casemix-adjusted separations divided by the number of separations. It
represents in a single number the overall relative expected use of resources by a hospital. For
example, a hospital with an average cost weight of 1.08 has an 8% more costly casemix than the
national average (which by design is 1.00).

The average cost weight for a group of hospitals (CMI) is multiplied by the total number of
separations for that group to produce the number of casemix-adjusted separations (the denominator).
The term ‘cost per casemix-adjusted separation’ derives from this use of the number of separations
adjusted by relative costliness.

        6.4. Costing Methodologies for Actual Average Costs
There are two main costing approaches that can be adopted for purposes of estimation of average
costs by diagnosis related group (DRG) and the calculation of DRG cost weights. for output-based
funding. These are these are the top down approach also known as step-down costing and the bottom
up approach, also known as activity costing.

         6.4.1.          Top-down: the Step-Down method or cost-modelling

The step-down (top-down) cost-finding method is based on allocating those costs that are not directly
paid for (support service cost centres) to those products or services to which payment may be attached
such as inpatient services. In the first instance, it calculates indirect costs such as overheads and then
adds them to the direct costs for support cost centres services, such as utilities, and then allocates the
costs of the support services to products that attract payment such as inpatient services categorised by

An allocation base is the item used to allocate costs, based upon its relationship to why the costs
occurred. Some common allocation bases are listed in Figure 15. The better the cause-and-effect
relationship between why the cost occurred and the allocation basis, the more accurate the cost
allocation. Because of their causal relationship to costs, allocation bases are also called cost drivers.

Figure 15: Some common allocation bases

                  Costs to be Allocated                              Allocation Basis
        Billing office                               Number of bills
                                                     Direct cost of department
        General Administration
                                                     Number of full-time-equivalent employees (FTEs)
        Laboratory (frequently charged directly to   Weighted average cost of tests
        patients rather than being allocated)        Number of tests

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        Medical records                                    Number or records accessed
                                                           Nursing hours
                                                           Acuity-weighted hours
        Purchasing                                         Number of purchase orders
        Rent, utilities, cleaning                          Square meter of area occupied

An example of a top down process is the allocation of costs of three support centres to which payment
is not attached to three patient service provision centres which generate revenue. The three
responsibility support centres may be utilities (allocated according to sq. m. of occupied space),
administration (allocated per direct costs), and laboratory (allocated according to the number of tests),
while the three patient services to which revenues may be attached are outpatient services, paediatric
inpatient services, and oncology inpatient services.

The goal of the step-down method is to allocate the costs of the support cost centres (utilities,
administration, and laboratory) fairly among each of the three product categories. There are four steps
to allocate the non-directly paid for costs:
    1. Determine an allocation base and compile basic statistics.
    2. Convert basic statistics for the step-down.
    3. Calculate allocation percentages.
    4. Allocate costs from the support centres to each of the product centres below it (thus, the
       "down" in "step-down").

Figure 16 below, demonstrates the method for step 3 and step 4.

After all the costs of the services that are not directly paid for have been allocated to those services
that are paid for, the totals are summed (see last column in Figure 4). Rather than the $200,000 it costs
to deliver Outpatient services when only direct costs are considered, the fully allocated costs are

Figure 16: Step- down method of allocating costs

                        Step 3 - Compute Allocation %                                        Step 4 - Allocate Costs
                                Administration                  Direct Costs
                  Utilities %                    Laboratory %                  Utilities $     Administration $   Laboratory $     Allocated
                                     %                               $
                                                                                                                                    Costs $
                                                                  50,000        (50,000)
                      10                                          100,000        5,000             (105,000)
                      20             20                           175,000        10,000             21,000             (206,000)
                      20             23              25           200,000        10,000             24,000              51,500      285,500
  Inpatient           25             23              45           200,000        12,500             24,000              92,700      329,200
  Inpatient           25             34              30           300,000        12,500             36,000             61,8000      410,300
   TOTAL            100%            100%            100%         $1,025,000        $0                 $0                  $0       $1,025,000

$285,500. Similarly, paediatric inpatient services changed from $200,000 to $329,200, and oncology
services changed from $300,000 to $410,300 when allocated costs are included. Thus, the fully
allocated cost reflects both the original direct costs as well as all allocated costs, but the total cost,
$1,025,000, remains the same as before. The step-down method is useful for determining the actual
average cost but not so much for controlling cost. The following points of methodology should be
considered when applying the step-down approach:

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    1. In finding the fully allocated costs, the order in which the services are allocated makes a
       difference in the final costs. For example, if administration were placed ahead of utilities in
       the allocation order, the costs of outpatient, paediatric, and oncology services would he
       different than in the example. There are two (sometimes conflicting) rules of thumb to help
       choose a reasonable order:
            a. rank-order the centres being allocated from highest dollar amount to lowest dollar
               amount (according to this rule, in the example, Laboratory and then Administration
               should have been listed ahead of Utilities); or
            b. list the centres, from highest to lowest, in an order that reflects the number of other
               centres they affect; it was for this reason that the centres were ordered as they were in
               the example, with Laboratory being last.

    2. The allocation base used to allocate costs makes a difference in the final costs. If for example,
       the number of full time employed staff (FTE’s) instead of direct dollars were the allocation
       basis tier for administration, and there were a low correlation between the two, then the costs
       of outpatient, paediatric, and oncology services would be different.

            Application to top down to DRG costing

In the case of DRGs, this approach is also sometimes referred to as cost modelling. It was used with
the initial development of the DRG system at Yale University. It is a form of top-down costing and
allocates all direct and overhead cost, to all DRGs. The basic financial data comes from the hospital's
central accounts.

The approach to DRG costing begins with an estimate as to what fraction of the hospital's overall
expenditure is consumed by inpatients – in Australia known as IFRAC or inpatient fraction ( in
Macedonia, the IFRAC has already been calculated by the HIF and will be validated in the next
costing round). The inpatient fraction is then split into the cost centres, such as wards, medical
salaries, operating room, pharmacy, radiology and pathology, social work and other allied health

Patient costs are distributed according to predetermined service weights (or allocation percentages),
based on the relative costs of nursing, pathology, radiology and so on, over all the DRGs. These
weights, in turn, are derived from previous studies (such as the one for developing the Yale cost
model). The initial service weights were developed in Maryland (USA) and were based on amount
charged, not what the service cost. There have been several Australian studies to develop Australian
service weights; their reliability varies however, according to whether clinicians' opinions or actual
data were used.

It should be noted that similar to the cost-weight adoption approach above, this method would use
service-weights from other countries and these weights may not accurately reflect the cost structures
of Macedonia.

            Shortcomings of top-down cost modelling

Cost modelling depends firstly on having reliable data on the inpatient fraction (IFRAC), and
secondly on the hospital having reasonable accounting structures and systems, with costs posted
accurately to the various cost centres.

Australian experience has shown that simply accepting financial data supplied by hospitals, without a
detailed on-site examination of their financial procedures and records, is likely to result in flawed

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data. This is of particular concern when the data used for cost modelling are not part of the hospital's
regular financial review processes.

The other problems with cost weight development using cost modelling are as follows:
    •   Their accuracy depends on the availability of reliable service weights which in themselves are
        often an estimate.
    •   Cost modelling assumes that the same service weights apply across all hospitals irrespective
        of their patient mix. When no calculated service weights are available, costs are distributed
        according to length of stay, which ignores for example, differences in illness severity, cost or
        nursing dependency in the one DRG.
    •   Cost data available at a DRG level only, and established by predetermined cost weights, is
        limited in its usefulness to assist clinicians to modify their practice behaviour to improve
        technical efficiency.

        6.4.2.      Bottom-up: activity-based costing
This approach is also referred to as patient level costing, clinical costing and activity based costing. It
involves the collection of patient level resource data about the use by each individual service such as
pathology, radiology, physiotherapy and nursing. The resource usage is then costed as accurately as
possible using the actual input cost data. This bottom up method can be used to aggregate costs to
individual patients, groups such as DRGs, and to clinical or other service units within hospitals.

Unlike the cost weight borrowing approach, and the top-down approach, the bottom-up method can
generate accurate national cost weight from first principles – but requires extensive cost data
collection across the hospital system as a whole.

             Activity-based costing method

The approach is based on the paradigm that activities consume resources and products consume
activities. Therefore, if activities or processes are controlled, then costs will be controlled. Similarly,
if the resources for an activity can be measured, a more accurate picture of the actual costs of services
can be found, as compared to traditional cost allocation.

Activity-based costing is called a bottom-up approach (Figure 17) because it finds the cost of each
service at the lowest level, the point at which resources are used, and aggregates them upward into

Figure 17: Bottom-Up nature of Activity Based Costing

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                                                    FINAL PRODUCTS
                                   Eg normal delivery, by-pass, surgery, appendectomy, etc

                                             INTERMEDIATE PRODUCTS
                         Eg physical examination, meals, laboratory tests, radiology, procedures, etc

         Eg accessing patient history, writing orders, chest X-ray, urinalysis, purchasing, billing, echocardiogram, etc

                                                 Eg labour, supplies, materials

An example of intermediate products for a normal delivery for example is shown in Figure 18. The
service "Normal Delivery" comprises three intermediate products (or processes): prenatal visit, labour
and delivery, and postpartum care. Each of these intermediate products comprises a number of
activities. For example, the prenatal visit includes urinalysis, complete blood count (CBC), vital signs,
recent history, etc. Each of these activities might also include a portion of what are usually considered
indirect costs, such as those associated with ordering supplies, medical records, or financial

        Figure 18             Examples of intermediate products and activities for a normal delivery

 Prenatal Visit Activities   Labor and Delivery          Postpartum Care
                                 Activities                  Activities
  • Urinalysis             • External fetal monitoring • Maternal monitoring
  • CBC                    • Coaching                  • Exercise therapy
  • Vital signs            • Epidural                  • Postpartum education
  • Weight                 • Maternal monitoring       • Other
  • Recent history         • Other
  • Prenatal education
  • Other

The activity-based costing model relies on an understanding of three key terms: direct costs, indirect
costs, and cost drivers. Direct costs are costs (e.g. nursing costs) that an organization can trace to a
particular cost object (e.g. a patient). Indirect costs are costs that an organization is not able to
directly trace to a particular cost object and are often referred to as overheads. For example, many
healthcare organizations have great difficulty tracing to a particular patient or service, such items as
the cost of the finance department, rent, or information systems. Thus, a cost is direct or indirect not
by its nature, but by the ability of the organization to trace it to a cost object.

An important difference between top-down cost allocation and activity-based costing is how each
handles indirect costs. As discussed above, top-down cost allocation methods usually deal with
indirect costs by allocating them to cost objects using relatively broad estimates of cause and effect
relationships. Activity-based costing on the other hand, attempts to overcome this problem by more
directly tracing costs to their cost objects and/or finding more precise cost drivers. Cost drivers are
those things that cause a change in the cost of an activity.

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For example, under traditional step-down costing, purchasing costs might be bundled with other
administrative costs and allocated to a service based on the relative size of its budget. Under activity-
based costing, it is more likely that the costs of purchasing would he allocated to that service more
precisely on the basis of the number of purchase orders emanating from the service, or more precisely,
by measuring the number of minutes spent processing purchase orders from that department.

            Activity-based costing as an efficiency improvement tool

Activity-based costing and activity-based management supports the drive for hospital efficiency as it
can generate management information that assists in understanding the interrelationships of the
various hospital activities and provides the basis for minimising resource wastage and eliminate non-
value adding costs wehere they occur.

Activity-based costing provides a better and more detailed cost model by allocating costs to activities
based on the resources they consume. As discussed above, the model links processes and resources.
For example, the psychology department may assign case managers to specific clinical departments.
In the step-down costing model the case manager cost is allocated to other departments based on a
broad allocation base such as patient days. Such an allocation method assumes that psychology
service is a generic commodity that is the same for a maternity patient without post natal depression
as one with depression, or an oncology or a HIV patient - and this is not the case.

The activity-based costing model would look at each patient population and examine the case
management process for each. The process would examine questions such as:
    •   What are the activities involved?
    •   How much case management time is consumed by each activity?
    •   What other resources are consumed?

An activity-based analysis produces a more detailed cost allocation. More importantly, the
relationship between activities and resources is clearer, making cost reduction easier. Adding to the
process appropriate quality, patient satisfaction, outcomes, and clinical performance measures makes
the efficiency motivated process improvement more intelligent and less likely to reduce the quality of

Literature on the subject suggests that activity-based costing can assist hospital managers achieve
their aims to make their institutions more efficient and effective because:
    • It is able to provide information required for performance improvements related decision
    • It recognizes that cost and quality are the direct result of the activities providers undertake to
         deliver services to their patients.
    • It is business-process and end-product focused, and invites cooperation, rather than
         competition, between functional departments.
    • It is developed based on the process knowledge and insight of those directly involved in the
         delivery of the service (doctors, nurses, therapists, et al, participate and contribute to its

In addition, activity-based costing will make sense to those charged with the responsibility for
improving performance and provides them with transparent information on the cost ramifications of
their decisions. More accurate cost data can be used for developing standard costs and evaluating the
cost implications of alternative clinical pathways. It can also provide important information about the
use of and organisation of labour which is the dominant cost in health systems.

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Patient level costing for DRGs

       Organisational overhead costs
       Patient costing starts by identifying organisational overhead costs and distributing these to
       each hospital department according to its share of the cost. Overheads for cleaning, staff
       numbers, patient activity or budget can be allocated on the basis of floor space. The
       distribution of overheads to departments can be either simple or complex, depending on the
       level of accuracy desired.
       Departmental overhead costs are then attributed to inpatient and outpatient activity. Each cost
       centre must have information systems that permit all service costs to be traced to the patient
       receiving the service. The quality of the information systems and the accuracy of individual
       service costing in each cost centre determines the reliability of the final cost data.

       Nursing staff costs
       Nursing staff costs are the single largest element in hospital expenditure and provide a major
       challenge. A robust nurse dependency or care management system, which relates nursing
       hours to the degree of patient illness, is the best option; when this is not available, nursing
       costs either at a ward or unit level, or across the whole hospital, can be distributed on the
       basis of length of stay (with its inherent limitations).

       Department costs
       Pathology and radiology departments can usually attribute tests to each patient, and provided
       this can be done for individual services, excellent cost data can be obtained. Pharmacy costs
       require the recording of pharmaceuticals dispensed to individual patients. If the hospital has
       only a ward pharmacy system, the tracking of cost data cannot be done at patient level and
       drug costs may have to be distributed on the basis of length of stay.

       Operating room costs
       These are usually based on staff time for each procedure recorded in the theatre register. In
       many hospitals, a major problem in allocating operating room costs has been surgical
       supplies, especially prostheses. A common practice is to distribute their cost in the same ratio
       as operating room time. This has led to substantial under costing of some DRGs grouping
       patients for whom expensive prostheses are required (eg, coronary artery stents). Their costs
       should be attributed to individual patients and not distributed across all patients using the
       operating room. The advent of new and high-cost prostheses has highlighted the need for
       accurate tracking systems that allow costs to be allocated appropriately to different or new

       Medical staff costs
       These present a problem as there is no simple system to allocate costs to individual patients,
       and doctors are unlikely to agree to keep a work diary. Therefore, medical staff costs are
       usually allocated to clinical units from staff rosters, and then distributed to patients (eg,
       according to length of stay in the unit).

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       6.5. Australian DRG Costing

        6.5.1.     Calculating costs
The Australian Department of Health and Aging regularly publishes National Hospital Cost Data
Collection Cost Reports and the most recent is for the year 2006-07. The report provides detailed cost
data for all DRGs and as a sample, the costings for DRG O60C - Vaginal Deliver - Single without
complications is displayed in Figure 19 below.

The following is a brief explanation of some of the items listed in Figure 19..

        Cost Weight - measure of the average cost of a DRG, compared with the average cost of all
        DRGs. The average cost of all DRGs is given a cost weight of 1.0.
        Number of Separations - a separation is termed to be one complete episode of care for a
        given patient.
        Number of Days - is the sum of lengths of stay of the separations for a given DRG.
        Non Clinical Salaries – this bucket contains all other costs of service provision for each
        inpatient separation; the costs are primarily other salaries and wages such as patient care
        Pathology - this item reports costs recorded from diagnostic clinical laboratory tests for the
        diagnosis and treatment of patients.
        Imaging - this item contains costs for diagnostic and therapeutic images produced under the
        direction of a qualified radiographer or suitably qualified technician and reported by a
        medical practitioner (radiologist).

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Figure 19: Itemised costs of AR-DRG O60C

 DRG Description                           O60C - Vaginal Deliver - Single without complications
 Cost Weight                               0.93
 Number of Separations (cases)             26,920
 Total Number of Days                      57,276
 ALOS (Days)                               2.13
                                                 Direct             Overhead
             Cost centres ($)                                                             Total
                                                 Costs                Costs
 1.    Medical Ward                                430                  35
 2.    Nursing Ward                               1,448                229
 3.    Non-Clinical Salaries                       321
 4.    Pathology                                    23                   6
 5.    Imaging                                       6                   1
 6.    Allied Health                                22                  14
 7.    Pharmacy                                     45                   7
 8.    Critical Care                                11                   3
 9.    Operating Rooms                              29                   7
 10.   Emergency Department                         17                   6
 11.   Supplies                                    128                 140
 12.   Special Processing Suites                    1                   0
 13.   Prostheses                                    2
 14.   On-Costs                                                        265
 15.   Hotel                                                           165
 16.   Depreciation                                                    101
                                                  2,483                979                3,462
 Total Average Cost per DRG ($)
                                                  72%                  28%                100%

         Allied Health – the item reports costs delivered to clinical services by qualified health
         professionals (exclusive of medical and nurse trained personnel) who have direct patient
         contact and provide services in Audiology, Dietetics/Nutrition, Occupational Therapy,
         Optometry, Orthotics, Physiotherapy, Podiatry, Social Work, Psychology, Speech Pathology
         and other Allied Health.
         Pharmacy - costs associated with the provision of pharmaceuticals including purchasing,
         production, distribution, supply and storage of drug products and clinical pharmacy service.
         Critical Care – this item is the combination of intensive care and coronary care costs.
         Operating Rooms - reports costs for a health care facility under sterile conditions, where
         significant surgical procedures are carried out under the direction of suitably qualified
         medical practitioners.
         Emergency Department - displays costs reported for health care facilities designed and
         equipped specifically to provide an environment where patients presenting in an unscheduled
         manner can be triaged, assessed and treated.

The points to note from the above calculation is that each DRG has been costed according to some 16
cost items. The direct costs and overhead costs of each of these items were valued separately and then
summed to provide the total cost. Of interest is that overhead costs make up some 28% of the total
cost of the normal delivery DRG which in Australia costs AUD3462 (MKD126,300).

         6.5.2.     Cost weight development
The state of Victoria has led the development of the national DRG system in Australia. Cost weights
in Victoria were developed from hospitals that had computer based costing systems. There were five

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hospitals in the initial costing study and this was subsequently expanded to 15 as more hospitals
acquired costing capability.

Having a history of individual patient data coded to ICD-9 made it possible to identify unexpected
variations and outliers, and to go back to the source hospital for data verification, especially for low
volume DRGs. Knowledge of the adequacy of each hospital's costing system was important in
achieving valid cost weights.

It was found that there was variation in cost weights from year to year and this was due to: the
changes in the national classification system; the impact of steadily improving hospital costing
systems; enhanced data collection; and to clinical variability within small volume DRGs from one
year to the next. Importantly, there were changes in reported actual costs because of improvement of
efficiency as a result of gradually reducing length of stay, increases in day surgery and changes in
clinical management practice (eg, use of different drugs, operative procedures or prostheses).

Based on the above experience, an annual update of cost weights is recommended, if hospitals are to
be confident about the prices underpinning casemix payment formulas. Once costing systems are in
place, this can be achieved at reasonable cost.

        6.6. Summary
There are two basic approaches to DRG costing. Firstly, the top-down cost modelling method in
which assignment of costs is based on data from the hospital's central accounts. Its major limitation is
that it is dependent on the accuracy of these data but it is a starting point in costing in most countries
and was the basis for the development of Australian national cost weights in the early 1990s.

The second method is the bottom up activity based patient level costing. It involves the recording of
the actual costs of individual patient episodes, including the resources consumed and an appropriate
share of the overheads. The result of this process is the calculation of average "true" cost of all
patients within a particular DRG. Ideally, this method requires a computerised system to capture data
on all aspects of a patient care episode.

Many hospitals however do not have patient costing systems because they are too small or do not
have the funds and for those a simpler but effective database management system has been
developed to draw together clinical and cost data at the patient level. The method emulates the results
of more expensive and sophisticated systems, but at much less cost.

In practice, DRG cost weight development makes use of both approaches to varying degrees. Since no
matter how much effort is put into costing, there will always be some degree of estimation, the
method that is given more priority depends on the availability of data and the accuracy that is sought
from the final costing product. Both methods use the same cost disaggregation systems for overheads
and medical costs and, and in hospitals without nursing resource utilisation systems, also for nursing
costs and therefore, the choice whether to invest more in costing systems should be based on
evaluating the cost-benefit of obtaining greater accuracy. For example, greater effort can be put into
obtaining greater costing accuracy in high volume; high cost DRGs as those listed in Attachment 4
to ensure that attention is paid to categories where savings will be the most meaningful (Attachment 4
indicates that in terms of total ALOS, some 70 DRGs make up 55% of the total days spent in
Australian hospitals - and many of these are psychiatric DRGs).

It is important for clinicians to understand and contribute to the development of patient costing
systems, and thus enhance the reliability of patient data. With the activity based patieny level costing
approach, which is based on actual patient data, clinicians will better understand how cost weights are
developed. If patient data collection is deficient in their hospital, they will appreciate how this affects

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cost weights. Access to reliable patient costing data allows benchmarking, which is essential if
clinicians are to be effective managers and control costs, while maintaining and improving quality.

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Republika Makedonija,
Ministerstvo za zdravstvo,
Proektna Edinica za Koordinacija (PEK)

   ______________2008 g, Skopje


Diajgnosti~ki Srodni Grupui (DSG) implementacija vo Makedonija,
                      niz serija na Rabotilnici


Zadovolstvo mi e da Ve informiram deka Ministerstvoto za zdravstvo (MZ)
na Republika Makedonija, vo sorabotka so Fondot za zdravstveno
osiguruvawe (FZO) i        avstraliskata   konsultantska ku}a “Karol
Konsalting”, uspe{no ja zapo~na implementacijata na Proektnata
aktivnost: ”Dizajn i implementacija na noviot model na pla}awe na
zdravstveni   uslugi    vo   bolnicite”.  Kompleksnata    problematika,
interakcijata na Proektnite rezultati so site elementi               na
zdravstveniot sistem nametnuva imperativ na Proektna metodologija, vo
kontekst na kvalitetna timska rabota, koja mora da ja sledime, so cel
postignuvawe na kompletna implementacija na Proektot.

Pla}awe na zdravstvenite ustanovi, izbor na adekvatna metodologija za
utvrduvawe na tro{ocite na zdravstvenite uslugi, analiza na kvalitetot
na zdravstvenata za{tita i prilagoduvawe na uslovite specifi~ni za nas,
baraat zaedni~ki pristap od site nas, koi u~estvuvame vo funkcioniraweto
na zdravstveniot sistem. Organizaciskata adaptacija na nivo na FZO;
bolni~ki ustanovi; osposobuvawe na personalot; i izgradba na sopstveni
kapaciteti, se samo fragmenti od edna celina na Proektot

Ve molime za potpolna sorabotka i striktno sledewe na upatstvata vo
ovoj dopis, kako i na narednite dopisi, koi }e sledat vo idnina.

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Na nivo na Va{ata ustanova, Ve molime da odredite DSG koordinator, koj
vo tekot na Proektot }e bide direktno vklu~en vo implementacijata i }e
obezbedi sobirawe na podatoci, koi }e gi bara konsultantskiot tim.

Isto taka, Ve molime da obezbedite u~estvo na Va{iot personal na
rabotilnicite (plan na odr`uvawe na rabotilnicite, vo prilog), koj
dosega bil vklu~en vo DSG Proektot, vo segmentot koj se odnesuva na
kodirawe, transfer na podatoci do FZO (5-8 osobi po ustanova); i 1-2
osobi od soodvetnite FZO podra~ni edinici.

Vo prethodniot period na sobirawe na podatoci, najverojatno, ste imale
odredeni dilemi, zatoa Ve molime na nivo na Va{ata ustanova, da gi
diskutirate site problemati~ni podra~ja na DSG implementacijata,
taka da Va{ite predstavnici mo`at da gi soop{tat i diskutiraat so
konsultantskiot tim.

Najqubezno Ve molam, da go potvrdite doa|aweto na Va{ite predstavnici
(imiwa i funkcija na nivo na Va{ata ustanova) do 12 juni, 2008 godina
(~etvrtok); i da ne izvestite dali Va{ata ustanova ima pristap na internet, na
sledniov e-mail:; cc;
ili faks: ++389 2 3123 353.

So obzir na va`nosta na podatocite, koi }e bidat dostavuvani vo
tekot na Proektnat zada~a i inkorporirani vo noviot model na pla}awe
na bolni~kite ustanovi, od poseben interes za Va{ata ustanova e da
osigurate {to poto~ni i podetalni podatoci, koi }e bidat barani od
konsultantskiot tim.

Sobiraweto na podatoci zapo~nuva na 1 juli, 2008 godina.

Va{iot dosega{en entuzijazam, pratewe na reformskite inicijativi,
kolegijalnost i prijatelstvo, se garancija deka uspe{no }e sorabotuvame i
na ovoj Proekt.

Srde~no Ve pozdravuvam,

Skopje, 10 juni, 2008                   Zamenik Minister za zdravstvo,

                                           M-r d-r Vladimir Lazarevik

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  Republika Makedonija,
  Ministerstvo za zdravstvo,
  Proektna Edinica za Koordinacija (PEK)
  ______________2008 g, Skopje


Diajgnosti~ki Srodni Grupi (DSG) implementacija vo Makedonija,
  Vo ime na Ministerstvoto za zdravstvo (MZ) na Republika Makedonija i vo
  moe ime, sakam da vi se zablagodaram za poddr{kata, koja vo ime na va{ite
  institucii ja poka`avte vo izminatite dve nedeli, preku va{iot aktiven
  anga`man i u~estvo vo rabotilnicite, koi gi organiziravme preku
  Proektnata Edinica na MZ i vo sorabotka so konsultantskata ku}a Karl
  Proektot na DSG implementacija, e od osobena va`nost za site nas, koi
  u~estvuvame vo razli~nite reformski inicijativi vo          zdravstveniot
  sektor, no pozitivniot efekt na Proektnata metodologij a zavisi
  isklu~telno od nas, od na{iot kapacitet na prifa}awe na novinite, ne samo
  vo kontekst na novi tehnologii povrzani so kodiraweto na dijagnozi i
  proceduri, tuku i od na{ata sposobnost da gledame na sopstvenata rabota
  od transparenten agol.
  Ulogata na Fondot za zdravstveno osiguruvawe (FZO) vo procesot na
  pla}awe na zdravstveni uslugi stanuva evidentna, a funkcijata na
  pregovarawe, prifa}awe na metodologija za utvrduvawe na cen i ni
  postanuvaat bliski i ostavaat prostor za na{e aktivno u~estvo vo
  procesot na kreirawe na istite.
  Zaradi seto ova, Ve molam da gi prifatite upatstvata vo ova pismo, kako
  integralen del od proektnata zada~a; a na organizacisko nivo na va{ite
  ustanovi, da ovozmo`ite nivna implementacija vo va{ata sekojdnevna
  klini~ka praksa.

 Prifa}awe na Proektnata metodologija go nametnuva slednoto:
    1) Od 1 juli, 2008 godina, zapo~nuva sobirawe na podatoci na nivo na site
       stacionarni bolni~ki ustanovi, so cel implementacija na noviot
       model na pla}awe na bolni~ki uslugi (DSG). Potrebnite podatoci za
       sekoj pacient, se strogo definirani              i prezentirani na
       predstavnicite od va{ite ustanovi preku Rabotilnicite, koi gi
       odr`avme vo periodot od 03-27 juni, 2008 godina. Vo prilog Vi
       dostavuvame {ematski prikaz na DSG gruperot (kompjuterski program
       za obrabotka na podatocite na pacientot pri otpust), vo koj e
       potrebno da se vnesat podatoci za sekoj pacient. Sekoj pacient treba

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      da bide inkorporiran vo programot, najkasno 5 dena od negovoto
      otpu{tawe od bolnica. Uredno vnesuvawe na podatocite e vo va{
      interes, zatoa {to istovremeno, FZO }e vr{i obrabotka i analiza na
      sobranite podatoci, so poseben naglasok na odreduvawe na stepenot na
      kompleksnost na pacientite, koi se hospitalizirani vo va{ata
      ustanova, od {to }e zavisi cenata na zdravstvenata usluga.

   2) Blagodarej}i na FZO, ovozmo`ivme da postavuvate pra{awa, vo slu~aj
      na bilo kakvi va{i dilemi od tehni~ki karakter (ote`en pristap do
      gruperot; problemi vo kodiraweto; nejasnotii za otpustnata
      dijagnoza itn.), preku direkten kontakt (telefon: 02 3289 006), sekoj
      petok od 12:00 – 15:00 ~asot, ili preku e-mail adresata: ; }e se obideme da odgovorime na site va{i
      pra{awa vo najkrratok mo`en rok. Na krajot na Proektot, va{ite
      pra{awa }e gi publicirame i distribuirame do site bolnici, taka da
      }e imate sopstvena bro{ura so site postaveni pra{awa i odgovori,
      koja }e ja koristite vo va{ata ponatamo{na rabota.

   3) Za pristapuvawe na DSG gruperot i vnesuvawe na podatoci,
      potrebna e pristapuvawe na veb stranicata na FZO, .
      Kliknete na DSG gruper, so zapi{uvawe na imeto na korisnikot i
      lozinkata }e mo`ete da zapo~nete so vnes na site podatoci. Imeto
      na korisnikot i lozinkata, se dostaveni vo prilog na ova pismo,
      istite se vo sopstvenost na va{ata ustanova. Vo kontekst na
      izbegnuvawe na mo`na zloupotreba, vi prepora~uvame pa`livo da go
      ~uvate pristapot do navedenite {ifri, ili eventualno da gi smenite
      {ifrite za pristap vo dogovor so FZO.

   4) Vo tekot na Proektnata zada~a, Va{ata ustanova }e bide posetena
      od DSG koordinatorot od Proektnata Edinica za koordinacija - MZ;
      i ekspertite na konsultantskata ku}a Karol konsalting.

   5) Vo sklad so dinamikata na Proektot, }e ve informirame za
      rezultatite dobieni od analizata na site sobrani podatoci; i
      nivnata interakcija so koli~inata na finansiski sredstva, koi se
      pla}aat za akutna bolni~ka za{tita.

   6) Iskreno se nadevam, deka so zaedni~ki sili, prevzemena inicijativa i
      odgovornost za implementacija na proektnata zada~a od strana na
      Ministerstvoto za zdravstvo, }e obezbedime uspe{na realizacija na
      ovoj zna~aen proekt za zdravstveniot sektor vo Republika Makedonija.

Vi posakuvam konstruktivna rabota i zaedni~ki uspeh.

                                              Srde~en pozdrav,
                                Zamenik Minister za zdravstvo,
                                       M-r d-r Vladimir Lazarevik

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Aspects where you believe improvements are possible

Part A: aspects that concern only your hospital

Topic                     Sub-topics                                      Tick one box
                                                                   Potential for improvement
                                                                  Major     Medium       Minor
A1      Efficiency        Scheduling and sequencing of care
                          Level of staffing
                          Mix of staffing
                          Use of consumables
                          Use of equipment
                          Use of buildings and plant
                          Other efficiency aspects
A2      Quality of care   Infection control
                          Incident reports, patient safety
                          Peer review, clinical audits
                          Outcomes of care
                          Other quality of care aspects
A3      Value for         Overprovision of services of low
        money             VFM
                          Underprovision of services of high
                          Appropriateness of admissions

                          Other value-for-money aspects
A4      Consumer          Equity of access
        issues            Equity of care provided
                          Convenience for families and friends
                          Availability of important information
                          Patient satisfaction and complaints
                          Other consumer issues

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A5      Clinical         Evidence-based methods of care
        practice         Protocols, guidelines, care pathways
                         Multidisciplinary teamwork
                         Medical records
                         Discharge planning
                         Outward and inward referrals
                         Coordination of care with other
                         Other clinical practice issues
A6      Workforce        Performance appraisal processes
        issues           Staff attitudes and opinions

                         Other workforce issues

Part B: ideas affecting this hospital AND other health service providers

Topic                    Sub-topics                                        Tick one box
                                                                    Potential for improvement
                                                                   Major      Medium      Minor
B1      Inward           Self-referrals (patients arrive by
        referrals        themselves)
                         From GPs
                         From clinical centers
                         From other hospitals
                         From other sources

B2      Outward          To patient's home
        referrals        To GPs
                         To clinical centers
                         To other hospitals
                         To other destinations
B3      Workload adjustment: transfer of services from this hospital to elsewhere
        List below any services you currently provide that would be more cost-effective if
        operated by another care provider.
        Service type                  Other care providers that should take over the service

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B4   Workload adjustment: transfer of services to this hospital from elsewhere
     List below any services currently provided elsewhere that would be more cost-effective
     if operated by your hospital.
     Service type                 Other care providers from which services should be
B5   Workload sharing: reorganization of work between this hospital and other care
     List below any services currently provided in part by this hospital and other service
     providers, which would be more cost-effective if changes were made to processes and
     Service type                 Other care providers involved in the service

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                                   Macedonian DRG Manual DRAFT


The table below shows the complete list of version 5 DRGs. For each DRG, the table shows the
relative cost as determined from the 2005 Australian costing survey of Australian government
hospitals and the average length of stay for each DRG.

                                                                     Relative   Average length of
 DRG    DRG Description
                                                                         cost        stay in days

 A01Z   Liver Transplant                                               26.57               29.27
 A03Z   Lung Or Heart/Lung Transplant                                  28.63               24.47
 A05Z   Heart Transplant                                               31.84               33.88
 A06Z   Tracheostomy Or Ventilation>95                                 22.59               31.40
 A07Z   Allog Bone Marrow Transplant                                   22.31               33.17
 A08A   Auto Bone Marrow Transplnt+Ccc                                 13.94               26.47
 A08B   Auto Bone Marrow Transplnt-Ccc                                  5.24               11.52
 A09A   Renal Transplant+Pancreas/+Ccc                                 14.64               18.13
 A09B   Renal Transplant -Pancreas-Ccc                                  8.27                9.15
 A40Z   Ecmo - Cardiac Surgery                                         45.36               33.64
 A41A   Intubation Age<16+Cc                                            6.56                9.71
 A41B   Intubation Age<16-Cc                                            2.62                3.93
 B60A   Estab Para/Quad+/-Or Pr+Ccc                                     7.99               27.26
 B60B   Estab Para/Quad+/-Or Pr-Ccc                                     2.40                7.76
 B01Z   Ventricular Shunt Revision                                      2.79                6.34
 B02A   Craniotomy + Ccc                                                9.26               19.52
 B02B   Craniotomy + Smcc                                               5.44               11.08
 B02C   Craniotomy - Cc                                                 4.10                7.29
 B03A   Spinal Procedures + Cscc                                        6.74               15.19
 B03B   Spinal Procedures - Cscc                                        3.24                5.45
 B04A   Extracranial Vascular Pr +Cscc                                  3.60                7.75
 B04B   Extracranial Vascular Pr -Cscc                                  2.25                3.53
 B05Z   Carpal Tunnel Release                                           0.52                1.06
 B06A   Cbl Psy,Mus Dysy,Npthy Pr+Cscc                                  6.97               18.29
 B06B   Cbl Psy,Mus Dysy,Npthy Pr-Cscc                                  1.20                1.78
 B07A   Prphl & Cranl Nerv & Oth Pr+Cc                                  3.19                8.35
 B07B   Prphl & Cranl Nerv & Oth Pr-Cc                                  1.13                1.63
 B40Z   Plasmapheresis + Neurolgcl Dis                                  1.27                3.80
 B41Z   Telemetric Eeg Monitoring                                       1.32                4.60
 B61A   Spinal Cord Cond+/-Or Pr +Cscc                                  7.73               20.63
 B61B   Spinal Cord Cond+/-Or Pr -Cscc                                  2.00                4.67
 B62Z   Admit For Apheresis                                             0.29                1.02
 B63Z   Dmntia&Chrnic Disturb Crbrl Fn                                  2.85               14.24
 B64A   Delirium+Ccc                                                    2.79               13.18
 B64B   Delirium-Ccc                                                    1.41                6.48
 B65Z   Cerebral Palsy                                                  0.53                1.59
 B66A   Nervous System Neoplasm+Cscc                                    2.61               10.04
 B66B   Nervous System Neoplasm-Cscc                                    1.21                4.41
 B67A   Degnrtv Nerv Sys Dis+Cscc                                       3.37               13.87
 B67B   Degnrtv Nerv Sys Dis A>59-Cscc                                  1.40                6.87
 B67C   Degnrtv Nerv Sys Dis A<60-Cscc                                  0.64                2.55
 B68A   Mlt Sclrosis&Cerebel Ataxia+Cc                                  2.98               10.81

KAROL Consulting                                                                                    64
                                Macedonian DRG Manual DRAFT

B68B   Mlt Sclrosis&Cerebel Ataxia-Cc                         0.57    2.38
B69A   Tia & Precerebral Occlusn+Cscc                         1.55    6.74
B69B   Tia & Precerebral Occlusn-Cscc                         0.68    2.97
B70A   Stroke +Ccc                                            4.76   18.84
B70B   Stroke +Scc                                            2.59   10.74
B70C   Stroke -Cscc                                           1.68    6.80
B70D   Stroke Died/Transferred<5 Days                         0.63    1.54
B71A   Cranial & Periphl Nerv Dsrd+Cc                         1.94    7.80
B71B   Cranial & Periphl Nerv Dsrd-Cc                         0.40    1.72
B72A   Nrvs Sys Inf Ex Vrl Mngts+Cscc                         4.41   13.44
B72B   Nrvs Sys Inf Ex Vrl Mngts-Cscc                         1.82    5.76
B73Z   Viral Meningitis                                       0.98    3.37
B74Z   Nontraumatic Stupor & Coma                             0.87    3.07
B75Z   Febrile Convulsions                                    0.45    1.40
B76A   Seizure + Cscc                                         1.76    6.08
B76B   Seizure - Cscc                                         0.59    1.99
B77Z   Headache                                               0.43    1.69
B78A   Intracranial Injury+Cscc                               3.17   10.00
B78B   Intracranial Injury-Cscc                               1.30    3.87
B79Z   Skull Fractures                                        1.05    3.13
B80Z   Other Head Injury                                      0.38    1.35
B81A   Other Dsrd Of Nervous Sys+Cscc                         2.39   10.86
B81B   Other Dsrd Of Nervous Sys-Cscc                         0.88    3.88
C01Z   Proc For Penetratng Eye Injury                         2.04    4.11
C02Z   Enucleations & Orbital Procs                           1.79    3.36
C03Z   Retinal Procedures                                     1.05    1.77
C04Z   Major Corn, Scleral&Conjnct Pr                         1.41    3.04
C05Z   Dacryocystorhinostomy                                  0.97    1.19
C10Z   Strabismus Procedures                                  0.68    1.02
C11Z   Eyelid Procedures                                      0.73    1.26
C12Z   Other Corn, Scleral&Conjnct Pr                         0.66    1.34
C13Z   Lacrimal Procedures                                    0.45    1.19
C14Z   Other Eye Procedures                                   0.50    1.36
C15A   Glaucoma/Cx Cataract Procs                             1.30    2.95
C15B   Glaucoma/Cx Cataract Procs,Sd                          0.68    1.00
C16A   Lens Procedures                                        0.96    1.45
C16B   Lens Procedures,Sd                                     0.65    1.00
C60A   Ac & Mjr Eye Infectn A>54/Cscc                         1.81    7.39
C60B   Ac & Mjr Eye Infectn A<55-Cscc                         1.12    3.88
C61Z   Neurological & Vasclr Eye Dsrd                         0.69    2.44
C62Z   Hyphema &Med Managd Eye Trauma                         0.46    1.76
C63A   Other Disorders Of The Eye +Cc                         1.19    4.61
C63B   Other Disorders Of The Eye -Cc                         0.47    1.65
D01Z   Cochlear Implant                                       7.37    1.34
D02A   Head & Neck Pr +Cscc                                   6.77   14.50
D02B   Head & Neck Pr+Malignancy/+Mcc                         2.91    5.51
D02C   Head & Neck Pr -Malignancy -Cc                         1.77    2.58
D03Z   Surgcl Rpr Cleft Lip/Palate Dx                         1.75    2.75
D04A   Maxillo Surgery + Cc                                   2.57    3.99
D04B   Maxillo Surgery - Cc                                   1.48    1.99
D05Z   Parotid Gland Procedures                               2.26    2.51
D06Z   Sinus, Mastd&Cmplx Mddl Ear Pr                         1.42    1.46
D09Z   Misc Ear,Nose,Mouth&Throat Pr                          0.90    1.19
D10Z   Nasal Procedures                                       0.84    1.08
D11Z   Tonsillectomy, Adenoidectomy                           0.68    1.15
D12Z   Oth Ear,Nose,Mouth & Throat Pr                         1.02    1.78
D13Z   Myringotomy +Tube Insertion                            0.39    1.05
D14Z   Mouth & Salivary Gland Procs                           0.79    1.52
D40Z   Dental Extract & Restorations                          0.54    1.07

KAROL Consulting                                                             65
                                 Macedonian DRG Manual DRAFT

D60A   Ear Nose Mouth&Throat Mal+Cscc                           2.88    9.05
D60B   Ear Nose Mouth&Throat Mal-Cscc                           0.89    2.81
D61Z   Dysequilibrium                                           0.51    2.36
D62Z   Epistaxis                                                0.47    1.83
D63A   Otitis Media & Uri + Cc                                  0.84    2.90
D63B   Otitis Media & Uri - Cc                                  0.48    1.78
D64Z   Laryngotracheitis&Epiglottitis                           0.38    1.25
D65Z   Nasal Trauma & Deformity                                 0.41    1.26
D66A   Oth Ear,Nose,Mouth&Thrt Dx +Cc                           1.03    3.52
D66B   Oth Ear,Nose,Mouth&Thrt Dx -Cc                           0.39    1.39
D67A   Oral&Dntal Dis-Extrct&Restn                              0.84    2.65
D67B   Oral&Dntal Dis-Extrct&Restn,Sd                           0.23    1.00
E01A   Major Chest Procedure + Ccc                              6.50   15.68
E01B   Major Chest Procedure - Ccc                              3.49    7.93
E02A   Other Respiratry Sys Or Pr+Ccc                           5.85   17.36
E02B   Other Respiratry Sys Or Pr+Scc                           2.43    5.97
E02C   Other Respiraty Sys Or Pr-Cscc                           0.97    1.65
E40Z   Resp Sys Dx + Ventilator Suppt                           5.87   10.75
E41Z   Resp Sys Dx +Non-Invas Ventiln                           4.18   11.52
E60A   Cystic Fibrosis +Cscc                                    4.23   12.15
E60B   Cystic Fibrosis -Cscc                                    3.18    9.51
E61A   Pulmonary Embolism + Cscc                                2.44    9.30
E61B   Pulmonary Embolism - Cscc                                1.25    5.26
E62A   Respiratry Infectn/Inflamm+Ccc                           2.65   10.86
E62B   Respiratry Infectn/Inflam+Smcc                           1.54    6.39
E62C   Respiratory Infectn/Inflamm-Cc                           0.89    3.52
E63Z   Sleep Apnoea                                             0.45    1.77
E64Z   Pulmonry Oedema & Resp Failure                           1.39    5.63
E65A   Chrnic Obstrct Airway Dis+Cscc                           1.82    8.14
E65B   Chrnic Obstrct Airway Dis-Cscc                           1.08    5.03
E66A   Major Chest Trauma A >69 + Cc                            2.27   10.31
E66B   Mjr Chest Trma A>69/+Cc                                  1.18    4.50
E66C   Major Chest Trauma A<70 - Cc                             0.64    2.23
E67A   Respiratry Signs & Symptm+Cscc                           1.06    3.94
E67B   Respirtry Signs & Symptm -Cscc                           0.49    1.54
E68Z   Pneumothorax                                             1.16    4.28
E69A   Bronchitis & Asthma A>49 + Cc                            1.21    5.46
E69B   Brnchts&Asthma A>49/+Cc                                  0.80    3.19
E69C   Bronchitis & Asthma A<50 -Cc                             0.53    1.69
E70A   Whoopng Cgh &Acte Brnchio+Cc                             1.65    4.94
E70B   Whoopng Cgh &Acte Brnchio-Cc                             0.89    2.48
E71A   Respiratory Neoplasms +Ccc                               2.62   10.50
E71B   Respiratory Neoplasms +Smcc                              1.39    5.46
E71C   Respiratory Neoplasms -Cc                                0.75    2.60
E72Z   Resp Probs From Neonatl Period                           1.56    6.93
E73A   Pleural Effusion + Ccc                                   2.64   10.41
E73B   Pleural Effusn + Scc                                     1.65    6.47
E73C   Pleural Effusion - Cscc                                  0.96    3.60
E74A   Interstital Lung Dis +Ccc                                2.66   11.21
E74B   Interstitial Lung Dis +Scc                               1.83    7.23
E74C   Interstitial Lung Dis -Cscc                              1.05    3.90
E75A   Other Resp Sys Dx A>64+Cc                                1.49    6.67
E75B   Ot Resp Sys Dx A>64/+Cc                                  1.01    3.85
E75C   Other Resp Sys Dx A<65 - Cc                              0.61    2.01
F01A   Implntn/Replcmnt Aicd Ttl+Cscc                          11.63   10.08
F01B   Implntn/Replcmnt Aicd Ttl-Cscc                          10.03    3.33
F02Z   Aicd Cmpnt Implntn/Replcmnt                             10.07    7.23
F03Z   Crdc Valv Pr+Pmp+Inv Inves                              14.05   23.82
F04A   Crd Vlv Pr+Pmp-Inv Inves+Ccc                             9.77   13.83

KAROL Consulting                                                               66
                                Macedonian DRG Manual DRAFT

F04B   Crd Vlv Pr+Pmp-Inv Inves-Ccc                            6.93    8.42
F05A   Coronary Bypass+Inv Inves+Ccc                          10.44   17.31
F05B   Coronary Bypass+Inv Inves-Ccc                           7.84   13.01
F06A   Coronary Bypass-Inv Inves+Cscc                          6.43    9.79
F06B   Coronary Bypass-Inv Inves-Cscc                          4.92    7.17
F07A   Other Cardthor/Vasc Pr+Pmp+Ccc                         11.94   14.70
F07B   Other Cardthor/Vasc Pr+Pmp-Ccc                          7.20    8.05
F08A   Mjr Reconstrc Vasc Pr-Pump+Ccc                          8.29   18.04
F08B   Mjr Reconstrc Vasc Pr-Pump-Ccc                          4.01    7.79
F09A   Oth Cardiothor Pr-Pmp+Ccc                               6.53   10.12
F09B   Oth Cardiothor Pr-Pmp -Ccc                              4.24    6.04
F10Z   Perc Corony Intervent+Ami                               2.93    4.46
F11A   Amputn Circ Sys-Up Lmb&Toe+Ccc                          9.37   28.71
F11B   Amputn Circ Sys-Up Lmb&Toe-Ccc                          4.68   15.64
F12Z   Cardiac Pacemaker Implantation                          3.07    4.65
F13Z   Up Limb&Toe Amp Circ Dis                                3.71   11.67
F14A   Vasc Pr-Mjr Reconstrc-Pump+Ccc                          5.06   12.63
F14B   Vasc Pr-Mjr Reconstrc-Pump+Scc                          2.13    4.76
F14C   Vasc Pr-Mjr Reconstr-Pump-Cscc                          1.49    2.46
F15Z   Perc Crny Intervent-Ami+Stent                           2.04    2.48
F16Z   Perc Crny Intervent-Ami-Stent                           1.99    2.70
F17Z   Cardiac Pacemaker Replacement                           1.99    2.53
F18Z   Crdc Pcmkr Revsn -Dvc Rplcmnt                           1.93    4.08
F19Z   Oth Trns-Vsclr Perc Crdc Intrv                          2.49    2.26
F20Z   Vein Ligation & Stripping                               1.05    1.44
F21A   Oth Circ Sys Or Pr+Ccc                                  5.14   15.55
F21B   Oth Circ Sys Or Pr -Ccc                                 2.00    5.73
F40Z   Circ Sys Dx+Ventilator Support                          5.46    8.77
F41A   Crc Dsrd+Ami+Inva Inve Pr+Cscc                          2.75    7.49
F41B   Crc Dsrd+Ami+Inva Inve Pr-Cscc                          1.69    4.43
F42A   Crc Dsrd-Ami+Ic In Pr+Cmpdx/Pr                          1.65    4.44
F42B   Crc Dsrd-Ami+Ic In Pr-Cmpdx/Pr                          0.89    1.88
F60A   Crc Dsrd+Ami-Inva Inve Pr+Cscc                          2.16    8.12
F60B   Crc Dsrd+Ami-Inva Inve Pr-Cscc                          1.04    3.54
F60C   Crc Dsrd+Ami-Inva Inve Pr Died                          1.20    3.90
F61Z   Infective Endocarditis                                  4.36   16.49
F62A   Heart Failure & Shock + Ccc                             2.68   11.21
F62B   Heart Failure & Shock - Ccc                             1.20    5.40
F63A   Venous Thrombosis + Cscc                                1.99    9.21
F63B   Venous Thrombosis - Cscc                                0.91    5.36
F64Z   Skin Ulcers Circulatory Disord                          2.49   11.11
F65A   Peripheral Vascular Dsrd +Cscc                          2.04    8.32
F65B   Peripheral Vascular Dsrd -Cscc                          0.68    2.66
F66A   Coronary Atherosclerosis + Cc                           0.87    3.72
F66B   Coronary Atherosclerosis - Cc                           0.42    1.76
F67A   Hypertension + Cc                                       1.15    5.04
F67B   Hypertension - Cc                                       0.56    2.60
F68Z   Congenital Heart Disease                                0.60    1.84
F69A   Valvular Disorders + Cscc                               1.91    7.16
F69B   Valvular Disorders - Cscc                               0.40    1.69
F70A   Mjr Arrhythmia&Crdc Arrst+Cscc                          1.56    4.83
F70B   Mjr Arrhythmia&Crdc Arrst-Cscc                          0.71    2.35
F71A   N-Mjr Arythm&Condctn Dsrd+Cscc                          1.51    6.24
F71B   N-Mjr Arythm&Condctn Dsrd-Cscc                          0.58    2.37
F72A   Unstable Angina + Cscc                                  1.32    5.10
F72B   Unstable Angina - Cscc                                  0.67    2.45
F73A   Syncope & Collapse + Cscc                               1.25    5.71
F73B   Syncope & Collapse - Cscc                               0.47    2.03
F74Z   Chest Pain                                              0.42    1.54

KAROL Consulting                                                              67
                                 Macedonian DRG Manual DRAFT

F75A   Other Circulatry System Dx+Ccc                          3.24   10.91
F75B   Other Circulatry System Dx+Scc                          1.57    5.15
F75C   Other Circulaty System Dx-Cscc                          0.83    2.77
G01A   Rectal Resection +Ccc                                   7.45   17.90
G01B   Rectal Resection -Ccc                                   4.26   10.46
G02A   Mjr Small & Large Bowel Pr+Ccc                          7.04   17.34
G02B   Mjr Small & Large Bowel Pr-Ccc                          3.39    8.73
G03A   Stomch,Oeshpgl & Duodnl Pr+Mal                          8.08   16.97
G03B   Stmch,Oeshpgl&Ddnl Pr-Mal+Cscc                          6.06   13.79
G03C   Stmch,Oeshpgl&Ddnl Pr-Mal-Cscc                          2.17    4.20
G04A   Peritoneal Adhesolysis A>49+Cc                          4.59   12.28
G04B   Prtnl Adhly A>49/+Cc                                    2.79    7.07
G04C   Peritoneal Adhesolysis A<50-Cc                          1.66    3.60
G05A   Mnr Small & Large Bowel Pr +Cc                          3.10    9.19
G05B   Mnr Small & Large Bowel Pr -Cc                          1.74    4.70
G06Z   Pyloromyotomy Procedure                                 1.69    3.91
G07A   Appendicectomy + Cscc                                   2.68    6.96
G07B   Appendicectomy - Cscc                                   1.34    2.88
G08A   Abdom & Oth Hern Pr A>59/+Cscc                          1.59    3.71
G08B   Abdom & Oth Hrn Pr 0<A<60-Cscc                          0.94    1.61
G09Z   Inguinal&Femoral Hernia Pr A>0                          0.92    1.44
G10Z   Hernia Procedures A<1                                   0.84    1.33
G11A   Anal & Stomal Procedures +Cscc                          1.92    5.54
G11B   Anal & Stomal Procedures -Cscc                          0.67    1.56
G12A   Oth Digest Sys Or Pr+Cscc                               4.52   12.39
G12B   Oth Digest Sys Or Pr-Cscc                               1.32    3.35
G42A   Oth Gastroscopy+Mjr Digest Dis                          1.52    5.63
G42B   Oth Gastroscopy+Mjr Dig Dis,Sd                          0.28    1.00
G43Z   Complex Colonoscopy                                     0.64    2.05
G44A   Other Colonoscopy+Cscc                                  2.45    9.51
G44B   Other Colonoscopy-Cscc                                  1.01    3.45
G44C   Other Colonoscopy, Sameday                              0.33    1.00
G45A   Other Gastrpy+N-Mjr Digest Dis                          1.22    4.20
G45B   Other Gastrpy+N-Mjr Dig Dis,Sd                          0.27    1.00
G46A   Complex Gastroscopy+Cscc                                2.91   10.37
G46B   Complex Gastroscopy-Cscc                                1.33    4.32
G46C   Complex Gastroscopy,Sd                                  0.38    1.00
G60A   Digestive Malignancy + Cscc                             1.55    6.57
G60B   Digestive Malignancy - Cscc                             0.80    3.63
G61A   Gi Haemorrhage A>64/+Cscc                               0.79    3.49
G61B   Gi Haemorrhage A<65 - Cscc                              0.41    1.66
G62Z   Complicated Peptic Ulcer                                1.46    5.68
G63Z   Uncomplicated Peptic Ulcer                              0.35    1.68
G64Z   Inflammatory Bowel Disease                              0.85    2.81
G65A   Gi Obstruction + Cc                                     1.54    5.96
G65B   Gi Obstruction - Cc                                     0.71    2.97
G66A   Abdmnl Pain/Mesentrc Adents+Cc                          0.75    2.97
G66B   Abdmnl Pain/Mesentrc Adents-Cc                          0.37    1.51
G67A   Oesphs, Gastr&Mis Dig A>9+Cscc                          1.28    5.47
G67B   Oesphs, Gastr&Mis Dig A>9-Cscc                          0.43    1.95
G68A   Gastroenteritis A<10 + Cc                               1.19    3.66
G68B   Gastroenteritis A<10 - Cc                               0.54    1.61
G69Z   Oesphs & Misc Dig Sys Dis A<10                          0.59    1.83
G70A   Other Digestive System Diag+Cc                          1.24    4.83
G70B   Other Digestive System Diag-Cc                          0.38    1.61
H01A   Pancreas, Liver & Shunt Pr+Ccc                          8.82   20.25
H01B   Pancreas, Liver &Shunt Pr-Ccc                           3.94    8.68
H02A   Mjr Biliary Tract Pr+(Mal/Ccc)                          6.72   16.68
H02B   Mjr Biliary Tract Pr-Mal+Smcc                           3.77    8.96

KAROL Consulting                                                              68
                                  Macedonian DRG Manual DRAFT

H02C   Mjr Biliary Tract Pr-Mal-Cc                               2.11    4.64
H05A   Hepatobiliary Diagntic Pr+Cscc                            3.86    9.57
H05B   Hepatobiliary Diagntic Pr-Cscc                            1.69    3.70
H06Z   Oth Heptobilry & Pancrs Or Pr                             3.94   10.13
H07A   Open Cholecystectomy+Cde/+Ccc                             5.52   13.63
H07B   Open Cholecystectomy-Cde-Ccc                              2.47    5.77
H08A   Lap Cholecystectmy+Cde/+Cscc                              2.71    6.21
H08B   Lap Cholecystectmy-Cde-Cscc                               1.34    1.90
H40Z   Endospic Pr Bleed Oes Varices                             3.09    7.35
H41A   Ercp Cx Theraputic Pr + Cscc                              3.19   10.16
H41B   Ercp Cx Theraputic Pr - Cscc                              1.33    3.47
H42A   Ercp Oth Theraputic Pr +Cscc                              2.87    9.46
H42B   Ercp Oth Theraputic Pr +Mcc                               1.61    5.02
H42C   Ercp Oth Theraputic Pr -Cc                                0.93    2.43
H60A   Cirrhosis & Alc Hepatitis +Ccc                            3.08   11.21
H60B   Cirrhosis & Alc Hepatitis+Scc                             1.45    5.85
H60C   Cirrhosis & Alc Hepatitis-Cscc                            0.69    2.92
H61A   Mal Hept Sys (A>69+Cscc)/+Ccc                             2.22    9.13
H61B   Mal Hept Sys (A>69-Cscc)/-Ccc                             1.00    3.97
H62A   Disorders Pancreas-Malig+Cscc                             2.29    7.88
H62B   Disorders Pancreas-Malig-Cscc                             0.92    3.74
H63A   Dsrd Lvr-Mal,Cirr,Alc Hep+Cscc                            2.38    8.38
H63B   Dsrd Lvr-Mal,Cirr,Alc Hep-Cscc                            0.65    2.17
H64A   Disorders Of Biliary Tract +Cc                            1.36    5.49
H64B   Disorders Of Biliary Tract -Cc                            0.55    2.33
I01Z   Bil/Mlti Mjr Jt Pr Lwr Extrmty                            9.19   14.19
I02A   Mcrvas Tt/Skin Graft+Cscc-Hand                           10.98   30.41
I02B   Skin Graft -Cscc -Hand                                    4.37   11.47
I03A   Hip Revision + Cscc                                       9.83   19.01
I03B   Hip Replac+Cscc/Hip Revsn-Cscc                            5.37   12.77
I03C   Hip Replacement - Cscc                                    4.38    7.52
I04Z   Knee Replacemt & Reattach                                 4.59    7.73
I05Z   Oth Mjr Jnt Replace&Limb Reatt                            4.23    6.28
I06Z   Spinal Fusion + Deformity                                 9.79    9.94
I07Z   Amputation                                                7.74   23.40
I08A   Other Hip & Femur Proc + Cscc                             4.95   15.26
I08B   Other Hip & Femur Pr -Cscc                                3.06    8.29
I09A   Spinal Fusion + Cscc                                      8.97   15.21
I09B   Spinal Fusion - Cscc                                      4.83    6.70
I10A   Other Back & Neck Procs + Cscc                            4.28   11.45
I10B   Other Back & Neck Procs - Cscc                            2.15    4.81
I11Z   Limb Lengthening Procedures                               3.27    5.90
I12A   Infc/Infm Bone/Jnt+Misc Pr+Ccc                            7.83   27.52
I12B   Infc/Infm Bone/Jnt+Misc Pr+Scc                            4.17   15.27
I12C   Infc/Infm Bne/Jnt+Misc Pr-Cscc                            2.15    6.72
I13A   Humer,Tibia,Fibul,Ankl Pr+Cscc                            4.65   12.85
I13B   Humer,Tib,Fib,Ank Pr A>59-Cscc                            2.54    6.60
I13C   Humer,Tib,Fib,Ank Pr A<60-Cscc                            1.91    3.66
I14Z   Stump Revision                                            2.36    7.25
I15Z   Cranio-Facial Surgery                                     3.07    4.68
I16Z   Other Shoulder Procedures                                 1.38    1.79
I17Z   Maxillo-Facial Surgery                                    2.24    3.43
I18Z   Other Knee Procedures                                     0.82    1.39
I19Z   Other Elbow, Forearm Procs                                1.56    2.64
I20Z   Other Foot Procedures                                     1.26    2.42
I21Z   Loc Ex, Rem Int Fix Dev Hp&Fmr                            1.35    3.07
I23Z   Loc Ex,Rem Int Fix-Hp&Fmr                                 0.67    1.27
I24Z   Arthroscopy                                               0.72    1.29
I25Z   Bone,Joint Dxtic Pr Inc Biopsy                            2.88    8.25

KAROL Consulting                                                                69
                                  Macedonian DRG Manual DRAFT

I27A   Soft Tissue Procedures +Cscc                             3.40   10.32
I27B   Soft Tissue Procedures -Cscc                             1.09    2.19
I28A   Other Connect Tissue Procs +Cc                           3.92   11.29
I28B   Other Connect Tissue Procs -Cc                           1.18    2.36
I29Z   Knee Reconstruction/Revision                             1.70    1.70
I30Z   Hand Procedures                                          0.88    1.35
I60Z   Femoral Shaft Fractures                                  2.79    8.75
I61Z   Distal Femoral Fractures                                 2.14    9.26
I63Z   Spr,Str&Dsloc Hip,Pelvis&Thigh                           0.85    2.93
I64A   Osteomyelitis +Cc                                        3.20   15.38
I64B   Osteomyelitis -Cc                                        1.13    5.31
I65A   Con Tis Mal,Inc Path Fx +Cscc                            2.16    7.74
I65B   Con Tis Mal,Inc Path Fx -Cscc                            0.90    2.94
I66A   Inflm Muscl Dsr +Cscc                                    3.52   10.46
I66B   Inflm Musculsktl Dsr -Cscc                               0.67    2.62
I67A   Septic Arthritis + Cscc                                  3.74   14.10
I67B   Septic Arthritis - Cscc                                  1.26    5.68
I68A   Non-Surg Spinal Disorders +Cc                            2.11    9.11
I68B   Non-Surg Spinal Disorders -Cc                            0.96    4.14
I68C   Non-Surg Spinal Disorders, Sd                            0.30    1.00
I69A   Bne Dis&Spcfc Arthro A>74+Cscc                           2.48   11.98
I69B   Bne Dis&Sp Arth A>74/+Cscc                               0.94    4.76
I69C   Bne Dis&Spcfc Arthro A<75-Cscc                           0.46    2.19
I70Z   Non-Specific Arthropathies                               0.87    3.69
I71A   Oth Musctendin Disrd A>69 +Cc                            1.38    6.98
I71B   Oth Musctendin Disrd A>69/+Cc                            0.64    2.67
I71C   Oth Musctendin Disrd A<70 -Cc                            0.42    1.66
I72A   Spec Musctend Disrd A>79/+Cscc                           1.91    7.96
I72B   Spec Musctend Disrd A<80-Cscc                            0.53    2.29
I73A   Aftcare Muscsk Impl A>59+Cscc                            2.82   14.54
I73B   Aftcare Muscsk Impl A>59/+Cscc                           1.02    4.91
I73C   Aftcare Muscsk Impl A<60-Cscc                            0.55    2.29
I74A   Inj Frarm,Wr,Hnd,Foot A>74+Cc                            1.75    7.92
I74B   Inj Frarm,Wr,Hnd,Foot A>74/+Cc                           0.68    2.38
I74C   Inj Frarm,Wr,Hand,Foot A<75-Cc                           0.45    1.19
I75A   Inj Sh,Arm,Elb,Kn,Leg A>64+Cc                            2.20   11.00
I75B   Inj Sh,Arm,Elb,Kn,Leg A>64/+Cc                           0.93    4.07
I75C   Inj Sh,Arm,Elb,Kn,Leg A<65-Cc                            0.47    1.53
I76A   Oth Musculoskeletl Dsr A>69+Cc                           1.82    8.22
I76B   Oth Musctl Dsr A>69/+Cc                                  0.76    2.89
I76C   Oth Musculoskeletl Dsr A<70-Cc                           0.41    1.37
I77A   Fracture Of Pelvis+Cscc                                  3.25   14.46
I77B   Fracture Of Pelvis -Cscc                                 1.47    7.47
I78A   Fracture Neck Femur+Cscc                                 2.06    8.41
I78B   Fracture Of Neck Femur-Cscc                              0.68    3.16
J01Z   Microvasc Tiss Transf Skn/Brst                           7.64   12.48
J06A   Major Pr Malig Breast Condtns                            1.92    3.95
J06B   Major Pr Non-Malig Breast Cnds                           1.56    2.06
J07A   Minor Pr Malig Breast Condns                             0.87    1.47
J07B   Minor Pr Non-Malig Breast Cnds                           0.60    1.06
J08A   Oth Skn Grf&/Dbrdmnt Pr+Cscc                             3.32    9.79
J08B   Oth Skn Grf&/Dbrdmnt Pr-Cscc                             0.97    2.07
J09Z   Perianal & Pilonidal Pr                                  0.79    1.94
J10Z   Skn,Subc Tis & Brst Plastic Pr                           0.71    1.28
J11Z   Other Skin, Subc Tis & Brst Pr                           0.43    1.19
J12A   L Lmb Pr +Ulcr/Cels+Ccc                                  7.53   27.97
J12B   L Lmb Pr+Ulcr/Cels-Ccc+Graft                             4.15   15.77
J12C   L Lmb Pr+Ulcr/Cels-Ccc-Graft                             2.82    9.96
J13A   L Lmb Pr-Ulcr/Cels+Graft+Cscc                            3.84   12.46

KAROL Consulting                                                               70
                                 Macedonian DRG Manual DRAFT

J13B   L Lmb Pr-Ulcr/Cels-(Grft&Cscc)                          1.42    4.36
J14Z   Major Breast Reconstructions                            5.61    7.20
J60A   Skin Ulcers                                             2.30   11.57
J60B   Skin Ulcers, Sameday                                    0.20    1.00
J62A   Mal Breast Dis (A>69+Cc)/+Cscc                          1.07    4.56
J62B   Mal Breast Dis (A>69-Cc)/-Cscc                          0.38    1.74
J63Z   Non-Malignant Breast Disorders                          0.44    1.82
J64A   Cellulitis A>59 + Cscc                                  2.13   10.03
J64B   Cellulitis A>59 -Cscc / A<60                            0.89    4.00
J65A   Trauma To Skn,Sub Tis&Bst A>69                          0.88    4.27
J65B   Trauma To Skn,Sub Tis&Bst A<70                          0.43    1.47
J67A   Minor Skin Disorders                                    0.94    3.56
J67B   Minor Skin Disorders, Sameday                           0.25    1.01
J68A   Major Skin Disorders                                    1.46    5.92
J68B   Major Skin Disorders, Sameday                           0.14    1.00
K01Z   Diabetic Foot Procedures                                6.01   20.16
K02Z   Pituitary Procedures                                    4.42    8.34
K03Z   Adrenal Procedures                                      4.14    7.75
K04Z   Major Procedures For Obesity                            2.49    3.72
K05Z   Parathyroid Procedures                                  2.01    3.76
K06Z   Thyroid Procedures                                      1.77    2.57
K07Z   Obesity Procedures                                      2.12    4.40
K08Z   Thyroglossal Procedures                                 1.05    1.24
K09Z   Other Endcrn, Nutr& Meta Or Pr                          4.42   11.85
K40Z   Endosc/Invest Pr Metab Dsdr-Cc                          0.61    1.89
K60A   Diabetes + Cscc                                         2.03    8.18
K60B   Diabetes - Cscc                                         0.91    3.57
K61Z   Severe Nutritional Disturbance                          3.66   13.22
K62A   Misc Metabolic Disrd + Ccc                              2.41   10.30
K62B   Misc Metabolic Disrd A>74/+Scc                          1.15    4.66
K62C   Misc Metabolic Disrd A<75-Cscc                          0.61    2.25
K63Z   Inborn Errors Of Metabolism                             0.66    2.02
K64A   Endocrine Disorders + Cscc                              2.26    8.48
K64B   Endocrine Disorders - Cscc                              0.77    2.39
L02A   Op Ins Peri Cath Dialysis+Cscc                          6.44   18.14
L02B   Op Ins Peri Cath Dialysis-Cscc                          1.90    4.85
L03A   Kdny,Urt&Mjr Bldr Pr Npsm+Cscc                          6.56   13.95
L03B   Kdny,Urt&Mjr Bldr Pr Npsm-Cscc                          4.34    6.29
L04A   Kdy,Urt&Mjr Bldr Pr N-Npm+Ccc                           5.75   14.82
L04B   Kdy,Urt&Mjr Bldr Pr N-Npm+Smcc                          2.93    6.49
L04C   Kdy,Urt&Mjr Bldr Pr N-Npm-Cc                            2.03    3.58
L05A   Tranureth Prostatectomy +Cscc                           3.53   11.16
L05B   Tranureth Prostatectomy -Cscc                           1.40    3.88
L06A   Minor Bladder Procedures+Cscc                           3.15    9.79
L06B   Minor Bladder Procedures -Cscc                          1.01    2.52
L07A   Transurethral Procs + Cscc                              2.03    6.57
L07B   Transurethral Procs - Cscc                              0.83    1.52
L08A   Urethral Procedures + Cc                                1.36    3.48
L08B   Urethral Procedures - Cc                                0.86    1.65
L09A   Oth Kidny & Urnry Tract Pr+Ccc                          7.85   19.83
L09B   Oth Kidny & Urnry Tract Pr+Scc                          3.37    8.77
L09C   Oth Kidny & Urnry Trct Pr-Cscc                          1.66    3.38
L40Z   Ureteroscopy                                            0.99    1.69
L41Z   Cystourethroscopy, Sameday                              0.32    1.00
L42Z   Esw Lithotripsy+Urinary Stones                          0.63    1.12
L60A   Renal Failure +Ccc                                      3.58   12.56
L60B   Renal Failure +Scc                                      1.93    7.41
L60C   Renal Failure -Cscc                                     1.01    4.01
L61Z   Admit For Renal Dialysis                                0.15    1.00

KAROL Consulting                                                              71
                                 Macedonian DRG Manual DRAFT

L62A   Kdny&Unry Trct Neoplasms +Cscc                          2.00    8.14
L62B   Kdny&Unry Trct Neoplasms -Cscc                          0.97    2.72
L63A   Kdny & Unry Trct Inf +Ccc                               2.61   11.83
L63B   Kdny & Unry Trct Inf A>69/+Scc                          1.18    5.44
L63C   Kdny & Unry Trct Inf A<70-Cscc                          0.68    2.56
L64Z   Urinary Stones & Obstruction                            0.52    1.71
L65A   Kdny & Unry Tr Sgns&Symps+Cscc                          1.47    5.98
L65B   Kdny & Unry Tr Sgns&Symps-Cscc                          0.53    2.18
L66Z   Urethral Stricture                                      0.56    1.91
L67A   Oth Kidny & Urnry Tract Dx+Ccc                          3.27   12.21
L67B   Oth Kidny & Urnry Tract Dx+Scc                          1.42    5.25
L67C   Oth Kidny & Urnry Trct Dx-Cscc                          0.49    1.78
M01Z   Major Male Pelvic Procedures                            4.40    7.56
M02A   Transurethral Prostectomy+Cscc                          2.66    8.38
M02B   Transurethral Prostectomy-Cscc                          1.38    3.42
M03A   Penis Procedures + Cc                                   1.74    3.89
M03B   Penis Procedures - Cc                                   0.91    1.47
M04A   Testes Procedures + Cc                                  1.70    4.03
M04B   Testes Procedures - Cc                                  0.70    1.16
M05Z   Circumcision                                            0.51    1.03
M06A   Oth Male Reprod Sys Or Pr +Mal                          3.05    3.43
M06B   Oth Male Reprod Sys Or Pr -Mal                          0.96    2.06
M40Z   Cystourethroscopy - Cc                                  0.30    1.08
M60A   Malignancy, Male Repr Sys+Cscc                          1.60    6.76
M60B   Malignancy, Male Repr Sys-Cscc                          0.55    2.21
M61A   Benign Prostatic Hypertry+Cscc                          1.72    9.66
M61B   Benign Prostatic Hypertry-Cscc                          0.45    1.92
M62A   Inflammation Male Reprd Sys+Cc                          1.22    4.46
M62B   Inflammation Male Reprd Sys-Cc                          0.54    2.36
M63Z   Sterilisation, Male                                     0.42    1.00
M64Z   Other Male Reproductive Sys Dx                          0.40    1.50
N01Z   Pelvic Evscrtn & Radcl Vlvctmy                          5.31    9.61
N02A   Utrn,Adnx Pr+Ovrn/Adnxl Mal+Cc                          4.80   10.57
N02B   Utrn,Adnx Pr+Ovrn/Adnxl Mal-Cc                          2.69    5.10
N03A   Utrn,Adnx Pr-Ovrn/Adnxl Mal+Cc                          4.10    8.97
N03B   Utrn,Adnx Pr-Ovrn/Adnxl Mal-Cc                          2.52    4.73
N04Z   Hysterectomy For Non-Malignanc                          1.86    4.07
N05A   Ooph&Com Fal Tube Pr Nmal+Cscc                          3.14    6.89
N05B   Ooph&Com Fal Tube Pr Nmal-Cscc                          1.58    2.92
N06Z   Fem Repr Sys Reconstructive Pr                          1.51    3.05
N07Z   Oth Utern & Adnexa Pr For Nmal                          0.81    1.35
N08Z   Endos & Lapar Pr, Fem Repr Sys                          0.72    1.17
N09Z   Conistn,Vagina,Cervix&Vulva Pr                          0.49    1.15
N10Z   Dxc Curettge, Dxc Hysteroscopy                          0.46    1.07
N11A   Oth Fem Rep S Pr A>64/+Mal/+Cc                          4.55    9.53
N11B   Oth Fem Rep Sys Pr A<65-Mal-Cc                          0.59    1.30
N60A   Malignancy Fem Reprod Sys+Cscc                          1.74    6.52
N60B   Malignancy Fem Reprod Sys-Cscc                          0.92    3.21
N61Z   Infections, Female Reprod Syst                          0.63    2.50
N62A   Mnstrl&Oth Fem Repr Sys Dis+Cc                          0.69    2.51
N62B   Mnstrl&Oth Fem Repr Sys Dis-Cc                          0.29    1.27
O01A   Caesarean Delivery +Ccc                                 3.67   10.31
O01B   Caesarean Delivery +Scc                                 2.50    6.45
O01C   Caesarean Delivery -Cscc                                1.94    4.51
O02A   Vaginal Delivery +Or Pr +Cscc                           1.97    5.07
O02B   Vaginal Delivery +Or Pr -Cscc                           1.49    3.63
O03Z   Ectopic Pregnancy                                       1.29    2.14
O04Z   Postpartum & Post Abortn+Or Pr                          0.93    2.01
O05Z   Abortion+ Or Proc                                       0.45    1.07

KAROL Consulting                                                              72
                               Macedonian DRG Manual DRAFT

O60A   Vaginal Delivery +Cscc                                 1.63    4.67
O60B   Vaginal Delivery -Cscc                                 1.16    3.07
O60C   Vaginal Del Single Uncompl                             0.99    2.36
O61Z   Postpartum & Post Abortn-Or Pr                         0.54    2.48
O63Z   Abortion-Or Proc                                       0.38    1.24
O64A   False Labour <37 Wk/+Ccc                               0.52    1.97
O64B   False Labour >=37 Wk -Ccc                              0.23    1.06
O66A   Antenatal&Oth Obstetric Adm                            0.58    2.36
O66B   Antenatal&Oth Obstetric Adm,Sd                         0.15    1.00
P01Z   Neonate,D/T<5Day Adm+Sig Or Pr                         1.20    1.61
P02Z   Neo,Cardiothoracic/Vascular Pr                        24.97   29.35
P03Z   Neo,Admwt 1000-1499G+Sig Or Pr                        19.74   48.57
P04Z   Neo,Admwt 1500-1999G+Sig Or Pr                        15.73   35.96
P05Z   Neo,Admwt 2000-2499G+Sig Or Pr                        10.18   20.63
P06A   Neo,Admwt >2499G+Sig Or Pr+Mmp                        16.13   30.54
P06B   Neo,Admwt >2499G+Sig Or Pr-Mmp                         5.19   10.31
P60A   Neo,D/Tr<5D Adm-Sig Pr+Newborn                         0.43    1.63
P60B   Neo,D/Tr<5D Adm-Sig Pr-Newborn                         0.72    1.82
P61Z   Neonate, Admission Wt <750 G                          36.01   66.06
P62Z   Neonate, Admission Wt 750-999G                        25.01   56.88
P63Z   Neo,Admwt 1000-1249G-Sig Or Pr                         9.65   32.30
P64Z   Neo,Admwt 1250-1499G-Sig Or Pr                         7.16   28.11
P65A   Neo,Admwt 1500-1999G-Sg Op+Mmp                         7.42   26.88
P65B   Neo,Admwt 1500-1999G-Sg Op+Mjp                         5.07   20.50
P65C   Neo,Admwt 1500-1999G-Sg Op+Otp                         3.70   18.74
P65D   Neo,Admwt 1500-1999G-Sg Op-Prb                         3.38   15.23
P66A   Neo,Admwt 2000-2499G-Sg Op+Mmp                         4.06   15.40
P66B   Neo,Admwt 2000-2499G-Sg Op+Mjp                         3.32   13.61
P66C   Neo,Admwt 2000-2499G-Sg Op+Otp                         2.25   10.93
P66D   Neo,Admwt 2000-2499G-Sg Op-Prb                         1.00    5.46
P67A   Neo,Admwt >2499G-Sig Or Pr+Mmp                         3.64   11.94
P67B   Neo,Admwt >2499G-Sig Or Pr+Mjp                         2.07    7.99
P67C   Neo,Admwt >2499G-Sig Or Pr+Otp                         1.16    5.46
P67D   Neo,Admwt >2499G-Sig Or Pr-Prb                         0.50    2.84
Q01Z   Splenectomy                                            3.77    8.00
Q02A   Oth Or Pr Bld&Bld Frm Org+Cscc                         5.33   14.44
Q02B   Oth Or Pr Bld&Bld Frm Org-Cscc                         0.98    1.94
Q60A   Reticlendo&Imnty Dis+Cscc                              2.47    6.89
Q60B   Reticlendo&Imnty Dis-Cscc+Mal                          1.13    3.55
Q60C   Reticlendo&Imnty Dis-Cscc-Mal                          0.37    1.42
Q61A   Red Blood Cell Disders + Ccc                           2.09    8.88
Q61B   Red Blood Cell Disders + Scc                           1.03    4.14
Q61C   Red Blood Cell Disders - Cscc                          0.36    1.42
Q62Z   Coagulation Disorders                                  0.63    2.56
R01A   Lymphma&Leukma+Mjr Or Pr +Cscc                        10.02   22.20
R01B   Lymphma&Leukma+Mjr Or Pr -Cscc                         3.20    6.79
R02A   Oth Nplstc Dsrd+Mjr Or Pr+Cscc                         5.39   12.40
R02B   Oth Nplstc Dsrd+Mjr Or Pr-Cscc                         2.92    5.22
R03A   Lymphma Leukma+Oth Or Pr +Cscc                         7.74   18.82
R03B   Lymphma Leukma+Oth Or Pr -Cscc                         1.57    2.64
R04A   Oth Nplstc Dsrd+Oth Or Pr+Cscc                         2.42    6.39
R04B   Oth Nplstc Dsrd+Oth Or Pr-Cscc                         1.13    2.04
R60A   Acute Leukaemia + Ccc                                  8.55   18.55
R60B   Acute Leukaemia + Scc                                  1.69    4.57
R60C   Acute Leukaemia - Cscc                                 0.97    2.44
R61A   Lymphma &N-Acute Leukaemia+Ccc                         4.91   14.63
R61B   Lymphma &N-Acute Leukaemia-Ccc                         1.62    4.73
R61C   Lymphoma/N-A Leukaemia,Sameday                         0.21    1.00
R62A   Other Neoplastic Disorders +Cc                         1.85    6.56

KAROL Consulting                                                             73
                                  Macedonian DRG Manual DRAFT

R62B   Other Neoplastic Disorders -Cc                            0.78    2.74
R63Z   Chemotherapy                                              0.24    1.00
R64Z   Radiotherapy                                              0.65    1.17
S60Z   Hiv, Sameday                                              0.30    1.00
S65A   Hiv-Related Diseases +Ccc                                 8.67   21.89
S65B   Hiv-Related Diseases +Scc                                 3.86   10.57
S65C   Hiv-Related Diseases -Cscc                                2.53    7.24
T01A   Or Proc Infect& Paras Dis+Ccc                             9.02   25.47
T01B   Or Proc Infect& Paras Dis+Smcc                            3.95   13.45
T01C   Or Proc Infect & Paras Dis-Cc                             2.10    7.26
T60A   Septicaemia + Cscc                                        2.75    9.11
T60B   Septicaemia - Cscc                                        1.31    4.86
T61A   Pstop&Psttr Inf A>54/+Cscc                                1.51    6.99
T61B   Postop&Posttr Infect A<55-Cscc                            0.88    3.90
T62A   Fever Of Unknown Origin + Cc                              1.34    4.54
T62B   Fever Of Unknown Origin - Cc                              0.63    2.10
T63A   Viral Illness A>59/+Cc                                    0.91    3.08
T63B   Viral Illness A<60 -Cc                                    0.49    1.62
T64A   Oth Infectous&Parstic Dis+Cscc                            2.88    8.83
T64B   Oth Infectous&Parstic Dis-Cscc                            0.89    3.03
U40Z   Mental Health Treat,Samedy+Ect                            0.19    1.00
U60Z   Mental Health Treat,Samedy-Ect                            0.18    1.00
U61A   Schizophrenia Disorders+Mhls                              3.80   21.71
U61B   Schizophrenia Disorders-Mhls                              2.09   11.08
U62A   Par&Acute Psych Dsrd+Cscc/Mhls                            3.06   14.32
U62B   Par&Acute Psych Dsrd-Cscc-Mhls                            1.48    5.86
U63A   Mjr Affect Dsrd A>69/+Cscc                                3.55   18.61
U63B   Major Affective Dsrd A<70-Cscc                            2.38   11.35
U64Z   Oth Affect & Somatoform Dsrd                              1.38    6.21
U65Z   Anxiety Disorders                                         1.04    4.04
U66Z   Eating & Obsessv-Compulsv Dsrd                            5.27   18.85
U67Z   Personlty Dsrd&Acute Reactions                            1.27    5.07
U68Z   Childhood Mental Disorders                                2.64    7.28
V60A   Alcohol Intoxicatn&Withdrwl+Cc                            0.88    3.66
V60B   Alcohol Intoxicatn&Withdrwl-Cc                            0.39    1.70
V61Z   Drug Intoxictn & Withdrawal                               1.16    5.10
V62A   Alcohol Use Dsrd & Dependence                             1.08    5.46
V62B   Alcohol Use Dsrd & Dependnc+Sd                            0.14    1.00
V63A   Opioid Use Dsrd & Dependence                              0.61    3.72
V63B   Opioid Use Dsrd&Depend-Advice                             0.57    2.87
V64Z   Other Drug Use Disord & Depend                            0.61    3.23
W01Z   Ventiln/Cranio Mult Sig Trauma                           24.21   33.31
W02Z   Hip,Femr&Limb Pr Mult Sig Trma                            9.44   19.41
W03Z   Abdominal Pr Mult Sig Trauma                              7.24   13.41
W04Z   Othr Or Pr For Mult Sig Trauma                            8.00   17.32
W60Z   Multiple Trauma, Died/Transf<5                            1.55    1.38
W61Z   Multiple Trauma - Signif Procs                            3.18   10.30
X02Z   Mic Tt/Skin Grafts Inj To Hand                            1.33    2.28
X04A   Other Pr Inj Lwr Lmb A>59/+Cc                             2.90    9.55
X04B   Other Pr Inj Lowr Limb A<60-Cc                            1.21    2.41
X05Z   Other Pr For Injuries To Hand                             0.88    1.70
X06A   Other Pr Other Injuries + Cscc                            3.43    9.90
X06B   Other Pr Other Injuries - Cscc                            1.04    2.30
X07A   Sk Graft Inj-Hand+Mic Tt/+Cscc                            5.58   17.02
X07B   Sk Graft Inj-Hand-Mic Tt-Cscc                             2.45    7.60
X60A   Injuries A>64 + Cc                                        1.35    6.18
X60B   Injuries A>64 - Cc                                        0.44    2.13
X60C   Injuries A<65                                             0.36    1.34
X61Z   Allergic Reactions                                        0.39    1.31

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                                 Macedonian DRG Manual DRAFT

X62A   Poisng/Toxc Eff Drugs A>59/+Cc                           0.93    3.15
X62B   Poisng/Toxc Eff Drugs A<60 -Cc                           0.39    1.36
X63A   Sequelae Of Treatmnt+Cscc                                1.52    5.78
X63B   Sequelae Of Treatmnt-Cscc                                0.62    2.42
X64A   Ot Inj,Pois&Tox Ef Dx A>59/+Cc                           1.03    3.66
X64B   Ot Inj,Pois&Tox Eff Dx A<60-Cc                           0.36    1.19
Y01Z   Severe Full Thick Burns                                 45.82   44.47
Y02A   Oth Burn+Skn G A>64/+Cscc/Comp                           9.39   21.17
Y02B   Oth Burn+Skn Gr A<65-Cscc-Comp                           3.09    7.60
Y03Z   Other Or Procs For Other Burns                           1.90    5.89
Y60Z   Burns,Trans Oth Acut Care <5 D                           0.40    1.15
Y61Z   Severe Burns                                             1.48    4.85
Y62A   Other Burns A>64/+Cscc/Comp                              2.43    8.98
Y62B   Other Burns A<65 -Cscc -Comp                             0.69    2.29
Z01A   Or Pr+Dx Oth Cnt Hlth Srv+Cscc                           1.68    3.61
Z01B   Or Pr+Dx Oth Cnt Hlth Srv-Cscc                           0.72    1.33
Z40Z   Follow Up +Endoscopy                                     0.27    1.02
Z60A   Rehabilitation + Cscc                                    3.49   19.63
Z60B   Rehabilitation - Cscc                                    1.80   13.49
Z60C   Rehabilitation, Sameday                                  0.25    1.00
Z61Z   Signs & Symptoms                                         0.70    3.15
Z62Z   Follow Up -Endoscopy                                     0.30    1.24
Z63A   Other Aftercare + Cscc                                   2.40   12.48
Z63B   Other Aftercare - Cscc                                   0.78    4.73
Z64A   Oth Fctr Infl Health Status                              0.94    5.50
Z64B   Oth Fctr Infl Health Status,Sd                           0.21    1.00
Z65Z   Mult,Oth&Unspcfd Congntl Anmls                           0.70    2.00
901Z   Ext Or Pr Unrel To Pdx                                   4.37   11.70
902Z   Non-Ext Or Pr Unrel To Pdx                               2.28    7.29
903Z   Prostatic Or Pr Unrel To Pdx                             5.47   22.64
960Z   Ungroupable                                              1.02    5.97
961Z   Unacceptable Principal Dx                                0.19    1.53
963Z   Neonatal Dx Not Consnt Age/Wgt                           3.72   13.80
All    All DRGs                                                 1.00    3.09

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                               Macedonian DRG Manual DRAFT


                                                                     Length of Stay
                                                   Total Episodes
Z60A      1.    REHABILITATION + CSCC                       53,074          1,245,901
Z64A      2.    OTH FCTR INFL HEALTH STATUS                 68,372          1,088,262
L61Z      3.    ADMIT FOR RENAL DIALYSIS                   807,514            807,514
P67D      4.    NEO,ADMWT >2499G-SIG OR PR-PRB             205,719            637,486
U61A      5.    SCHIZOPHRENIA DISORDERS+MHLS                16,430            573,186
Z60B      6.    REHABILITATION - CSCC                       29,956            500,708
U63B      7.    MAJOR AFFECTIVE DSRD A<70-CSCC              27,899            432,916
O60B      8.    VAGINAL DELIVERY -CSCC                     126,673            424,536
A06Z      9.    TRACHEOSTOMY OR VENTILATION>95               9,687            317,178
B63Z      10.   DMNTIA&CHRNIC DISTURB CRBRL FN              11,779            316,803
U61B      11.   SCHIZOPHRENIA DISORDERS-MHLS                15,634            309,539
O01C      12.   CAESAREAN DELIVERY -CSCC                    59,623            288,796
R63Z      13.   CHEMOTHERAPY                               285,385            285,385
I04Z      14.   KNEE REPLACEMT & REATTACH                   28,860            229,545
E65A      15.   CHRNIC OBSTRCT AIRWAY DIS+CSCC              26,892            228,169
G44C      16.   OTHER COLONOSCOPY, SAMEDAY                 192,283            192,283
F62B      17.   HEART FAILURE & SHOCK - CCC                 28,835            173,977
J64B      18.   CELLULITIS A>59 -CSCC / A                   40,295            166,162
U63A      19.   MJR AFFECT DSRD A>69/+CSCC                   6,360            161,731
E62A      20.   RESPIRATRY INFECTN/INFLAMM+CCC              14,552            159,125
E62B      21.   RESPIRATRY INFECTN/INFLAM+SMCC              24,233            157,422
C16B      22.   LENS PROCEDURES,SD                         155,063            155,063
U67Z      23.   PERSONLTY DSRD&ACUTE REACTIONS              21,920            154,998
E65B      24.   CHRNIC OBSTRCT AIRWAY DIS-CSCC              27,585            149,382
G67B      25.   OESPHS, GASTR&MIS DIG A>9-CSCC              68,221            147,977
B70A      26.   STROKE +CCC                                  7,524            144,481
G45B      27.   OTHER GASTRPY+N-MJR DIG DIS,SD             144,398            144,398
I03C      28.   HIP REPLACEMENT - CSCC                      17,711            136,427
F74Z      29.   CHEST PAIN                                  82,271            129,015
F62A      30.   HEART FAILURE & SHOCK + CCC                 10,450            123,766
P67C      31.   NEO,ADMWT >2499G-SIG OR PR+OTP              24,299            123,193
I08A      32.   OTHER HIP & FEMUR PROC + CSCC                7,803            120,074
U64Z      33.   OTH AFFECT & SOMATOFORM DSRD                13,331            118,508
I03B      34.   HIP REPLAC+CSCC/HIP REVSN-CSCC               9,851            118,402
N04Z      35.   HYSTERECTOMY FOR NON-MALIGNANC              27,901            115,849
G02A      36.   MJR SMALL & LARGE BOWEL PR+CCC               6,653            114,972
E62C      37.   RESPIRATORY INFECTN/INFLAMM-CC              30,836            113,312
D40Z      38.   DENTAL EXTRACT & RESTORATIONS              106,452            108,818
I68B      39.   NON-SURG SPINAL DISORDERS -CC               23,649            107,446
L63B      40.   KDNY & UNRY TRCT INF A>69/+SCC              18,004            102,340
U60Z      41.   MENTAL HEALTH TREAT,SAMEDY-ECT             101,652            101,652
O66A      42.   ANTENATAL&OTH OBSTETRIC ADM                 41,718            101,017
J11Z      43.   OTHER SKIN, SUBC TIS & BRST PR              85,660             97,790
I68A      44.   NON-SURG SPINAL DISORDERS +CC               10,341             97,452
B70B      45.   STROKE +SCC                                  8,510             92,407
Z64B      46.   OTH FCTR INFL HEALTH STATUS,SD              89,471             89,471
I18Z      47.   OTHER KNEE PROCEDURES                       74,965             88,352
G46C      48.   COMPLEX GASTROSCOPY,SD                      88,026             88,026
Z40Z      49.   FOLLOW UP +ENDOSCOPY                        85,931             87,203
T60A      50.   SEPTICAEMIA + CSCC                           9,258             86,933
G67A      51.   OESPHS, GASTR&MIS DIG A>9+CSCC               14,76             85,843
O01B      52.   CAESAREAN DELIVERY +SCC                     13,498             85,666
O60A      53.   VAGINAL DELIVERY +CSCC                      17,078             81,955
G02B      54.   MJR SMALL & LARGE BOWEL PR-CCC               9,761             80,817
F71B      55.   N-MJR ARYTHM&CONDCTN DSRD-CSCC              34,901             79,169
F42B      56.   CRC DSRD-AMI+IC IN PR-CMPDX/PR              48,727             79,110
R61B      57.   LYMPHMA &N-ACUTE LEUKAEMIA-CCC              15,760             77,866
E71B      58.   RESPIRATORY NEOPLASMS +SMCC                 11,550             77,424
O05Z      59.   ABORTION+ OR PROC                           74,831             77,218
B81B      60.   OTHER DSRD OF NERVOUS SYS-CSCC              10,687             76,415
G60A      61.   DIGESTIVE MALIGNANCY + CSCC                  9,253             76,400
K60A      62.   DIABETES + CSCC                              9,678             76,041
V62A      63.   ALCOHOL USE DSRD & DEPENDENCE                8,617             75,714
O60C      64.   VAGINAL DEL SINGLE UNCOMPL                  29,761             75,497
K01Z      65.   DIABETIC FOOT PROCEDURES                     3,491             74,123
B60B      66.   ESTAB PARA/QUAD+/-OR PR-CCC                  6,073             71,760
N07Z      67.   OTH UTERN & ADNEXA PR FOR NMAL              60,207             71,090
Z63A      68.   OTHER AFTERCARE + CSCC                       6,381             71,028
Q61C      69.   RED BLOOD CELL DISDERS - CSCC               50,302             70,792
F60A      70.   CRC DSRD+AMI-INVA INVE PR+CSCC               8,734             69,282
                                                                         13,588,561     55%
                                                                     Length of Stay
                                                   Total Episodes

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                                  Macedonian DRG Manual DRAFT

 G66B       71.    ABDMNL PAIN/MESENTRC ADENTS-CC                  42,139            67,809
 B70C       72.    STROKE -CSCC                                     9,037            66,892
 O61Z       73.    POSTPARTUM & POST ABORTN-OR PR                  23,382            66,525
 H08B       74.    LAP CHOLECYSTECTMY-CDE-CSCC                     34,649            64,776
 I10B       75.    OTHER BACK & NECK PROCS - CSCC                  12,986            63,957
 P66C       76.    NEO,ADMWT 2000-2499G-SG OR+OTP                   5,555            63,855
 I08B       77.    OTHER HIP & FEMUR PR -CSCC                       8,115            62,203
 E71A       78.    RESPIRATORY NEOPLASMS +CCC                       5,077            61,831
 U65Z       79.    ANXIETY DISORDERS                               11,676            61,036
 B81A       80.    OTHER DSRD OF NERVOUS SYS+CSCC                   4,266            61,025
 901Z       81.    EXT OR PR UNREL TO PDX                           6,044            60,618
 K60B       82.    DIABETES - CSCC                                 17,913            59,927
 G07B       83.    APPENDICECTOMY - CSCC                           21,495            59,127
 F06A       84.    CORONARY BYPASS-INV INVES+CSCC                   5,703            58,977
 U66Z       85.    EATING & OBSESSV-COMPULSV DSRD                   2,780            58,361
 G11B       86.    ANAL & STOMAL PROCEDURES -CSCC                  40,788            58,195
 G09Z       87.    INGUINAL&FEMORAL HERNIA PR A>0                  40,128            58,184
 F72B       88.    UNSTABLE ANGINA - CSCC                          23,997            57,550
 I13C       89.    HUMER,TIB,FIB,ANK PR A<60-CSCC                  18,421            57,295
 I30Z       90.    HAND PROCEDURES                                 44,736            56,898
 F42A       91.    CRC DSRD-AMI+IC IN PR+CMPDX/PR                  14,560            56,663
 E75A       92.    OTHER RESP SYS DX A>64+CC                        7,717            55,022
 B60A       93.    ESTAB PARA/QUAD+/-OR PR+CCC                      1,605            54,768
 Z60C       94.    REHABILITATION, SAMEDAY                         53,946            53,946
 F71A       95.    N-MJR ARYTHM&CONDCTN DSRD+CSCC                   8,854            53,388
 N06Z       96.    FEM REPR SYS RECONSTRUCTIVE PR                  17,471            53,327
 J64A       97.    CELLULITIS A>59 + CSCC                           5,059            52,364
 Z61Z       98.    SIGNS & SYMPTOMS                                14,496            52,358
 M02B       99.    TRANSURETHRAL PROSTECTOMY-CSCC                  15,993            52,059
 I65A       100.   CON TIS MAL,INC PATH FX +CSCC                    4,734            51,861
 G01A       101.   RECTAL RESECTION +CCC                            2,980            51,621
 U62A       102.   PAR&ACUTE PSYCH DSRD+CSCC/MHLS                   2,740            51,238
 B67A       103.   DEGNRTV NERV SYS DIS+CSCC                        2,837            50,866
 X60C       104.   INJURIES A                                      35,766            50,701
 B76B       105.   SEIZURE - CSCC                                  23,568            49,783
 B64B       106.   DELIRIUM-CCC                                     5,942            49,744
 I75A       107.   INJ SH,ARM,ELB,KN,LEG A>64+CC                    4,233            49,527
 J60A       108.   SKIN ULCERS                                      3,815            49,188
 F60B       109.   CRC DSRD+AMI-INVA INVE PR-CSCC                  14,371            49,074
 J08B       110.   OTH SKN GRF&/DBRDMNT PR-CSCC                    32,348            48,942
 F15Z       111.   PERC CRNY INTERVENT-AMI+STENT                   20,420            48,905
 E69C       112.   BRONCHITIS & ASTHMA A                           28,725            48,511
 P67B       113.   NEO,ADMWT >2499G-SIG OR PR+MJP                   6,946            48,035
 L63C       114.   KDNY & UNRY TRCT INF A<70-CSCC                  19,088            47,760
 F08A       115.   MJR RECONSTRC VASC PR-PUMP+CCC                   2,673            47,623
 O01A       116.   CAESAREAN DELIVERY +CCC                          4,508            47,522
 F73B       117.   SYNCOPE & COLLAPSE - CSCC                       21,248            47,493
 L64Z       118.   URINARY STONES & OBSTRUCTION                    27,301            47,295
 G01B       119.   RECTAL RESECTION -CCC                            4,767            47,195
 O66B       120.   ANTENATAL&OTH OBSTETRIC ADM,SD                  46,890            46,890
 D63B       121.   OTITIS MEDIA & URI - CC                         26,834            46,811
 F10Z       122.   PERC CORONY INTERVENT+AMI                       10,723            46,692
 I16Z       123.   OTHER SHOULDER PROCEDURES                       27,731            45,967
 T61A       124.   PSTOP&PSTTR INF A>54/+CSCC                       6,625            45,665
 I69B       125.   BNE DIS&SP ARTH A>74/+CSCC                       8,193            45,516
 X62A       126.   POISNG/TOXC EFF DRUGS A>59/+CC                  13,090            45,188
 960Z       127.   UNGROUPABLE                                      2,618            45,030
 J06A       128.   MAJOR PR MALIG BREAST CONDTNS                   12,412            44,917
 B02A       129.   CRANIOTOMY + CCC                                 2,353            44,508
 R61A       130.   LYMPHMA &N-ACUTE LEUKAEMIA+CCC                   2,910            44,032
 X60A       131.   INJURIES A>64 + CC                               6,495            43,677
 G42A       132.   OTH GASTROSCOPY+MJR DIGEST DIS                   7,709            42,586
 B66A       133.   NERVOUS SYSTEM NEOPLASM+CSCC                     3,341            42,540
 Z63B       134.   OTHER AFTERCARE - CSCC                           8,876            41,972
 L41Z       135.   CYSTOURETHROSCOPY, SAMEDAY                      41,297            41,297
 G45A       136.   OTHER GASTRPY+N-MJR DIGEST DIS                  10,082            41,209
 F12Z       137.   CARDIAC PACEMAKER IMPLANTATION                   9,344            40,481
 F73A       138.   SYNCOPE & COLLAPSE + CSCC                        7,291            40,403
 F08B       139.   MJR RECONSTRC VASC PR-PUMP-CCC                   5,178            40,283
                                                                                3,567,490      15%
                                  TOTAL LENGTH OF STAY                         24,586,508

* Number of separations for each AR-DRG version 5.1 with greater than 49 separations, by hospital
type, Australia, 2004-05. (Australian Institute of Health and Welfare)

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                                Macedonian DRG Manual DRAFT


          TERM                                                DEFINITION
                          An allocation of the mix of resources for maximal benefit, i.e. such that no change in
Allocative efficiency
                          spending priorities could improve the overall welfare.
                          In general, costs relating to use of resources which can be applied to production over a
Capital costs             prolonged period of time. They include costs associated with land, buildings, and
                          An information tool involving the use of scientific methods to build and make use of
Casemix                   classifications of patient care episodes. In popular usage, the mix of types of patients
                          treated by a hospital or other health care facility.
                          Clinical classification where classes are designed to be both clinically coherent AND
Casemix classification    homogeneous in terms of variable of global interest (like cost, quality of care, or
Casemix index - CMI (or   A single number representing the relative expected resource use for the separations (the
average cost weight)      number of casemix-adjusted separations divided by the number of separations).
                          A protocol, or defined standard set of tests and procedures to be used in diagnosing or
Clinical Pathway          treating a particular symptom or diseases (Getzen 1997)
                          A form of economic evaluation where all costs and consequences are
Cost-benefit analysis
                          expressed in monetary terms. It enables the assessment of whether a particular
                          objective is worth achieving.
                          An accounting entity where all costs associated with a particular type of activity can be
Cost centre               recorded.
                          A measure of the average cost of a particular DRG, compared with the average cost of
Cost weight               a reference DRG. Usually the average cost across all DRGs is chosen as the reference
                          value, and given a weight of 1.
                          Used in several ways to designate costs that are relatively easily related to products. In
Direct costs              the standard product costing method, costs which are passed directly to cost centres
                          from the general ledger (rather than allocated via overhead cost centres).
                          The effect of the activity and the end results, outcomes or benefits for the population
                          achieved in relation to the stated objectives. It is an expression of desired effect of
Effectiveness             programme, service intervention in reducing a health problem or improving an
                          unsatisfactory health situation.
Efficiency                The effect or end results achieved in relation to the effort expended in terms of money,
                          resources and time.
                          The costs of production of a service or product which are unaffected by changes in the
Fixed costs               production volume, at least within a wide range of volumes. In contrast to variable
                          costs, which vary in accordance with changes in production volumes.
                          Used in several ways to designate costs that are not easily able to be related to specific
Indirect costs            products (for example, management activities of clinicians, or administrative
Inpatient fraction -      Estimated proportion of total hospital expenditure that relates to admitted patients
IFRAC                     (inpatients)
                          Generally, an unusual case. In the funding context, a patient with costs far from the
Outlier                   average for the case type, and for whom the per case payment will therefore be
                          adjusted. May be higher cost (high outlier) or lower cost (low outlier).

  KAROL Consulting                                                                                            78
                                 Macedonian DRG Manual DRAFT

         TERM                                                  DEFINITION
                           A method of funding, whereby the primary determinant of the funding received by the
Output-based (or           care provider is the number of products (or cases) of each type and their relative costs.
casemix-based) funding     Equivalent to casemix-based funding, excepting that this term is better restricted to
                           products which are episodes of patient care.
                           This entity not only pays the premium, but also controls the premium amount before
                           paying it to the provider. Included in the category of purchasers or payers are patients,
Purchaser                  businesses and managed care organizations. While patients and businesses function as
                           ultimate purchasers, managed care organizations and insurance companies serve a
                           processing or payer function.
                           Usually refers to an arrangement whereby the health service funding, planning, and
                           purchasing functions of government health authorities are separated from care
                           provision functions. A typical arrangement is where the government is the funder, and
Purchaser-provider split   where regional purchasing authorities are separately established to plan and purchase
                           health services from providers like hospitals and heath centres. The main aim is to
                           encourage competition between providers, who may be required to compete for
                           contracts to provide services denominated by purchasers in casemix terms.
                           The costs incurred by overhead cost centres. The costs which cannot easily be
Overhead costs             associated with particular products (or particular patient care episodes).
Separation                 Same as the number of inpatient admissions/discharges
                           The production of the greatest amount or quality of outcome for any specified level of
Technical efficiency       resources.
                           The costs of production of a service or product which vary in proportion to the
Variable costs             production volume. In contrast to fixed costs, which are generally unaffected by
                           changes in production volume.

  KAROL Consulting                                                                                            79

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Description: Macedonian Chart of Accounts document sample