Some thoughts on health and healthcare

Abstract In an acute hospital, Diagnosis-Related Groups (DRGs) and patient-based costing solve different, complementary problems. DRGs are a prospective payment and case-mix classification mechanism : they group inpatient episodes for reimbursement and resource allocation using coded diagnoses, procedures, severity, and other episode variables. Patient-based costing - especially Activity-Based Costing (ABC) and Time-Driven Activity-Based Costing (TDABC) - is an internal measurement method : it estimates the actual resources consumed by a given patient across the care cycle. The practical implication is that DRGs tell the hospital what it is likely to be paid, while patient-based costing tells the hospital what the case actually cost. An effective acute-hospital costing architecture therefore requires structured EHR data, reliable timestamps and event logs, linkage to HR/finance/supply systems, and a semantic layer that uses SNOMED CT and LOINC for point-of-care capture and WHO ICD-11 a...

Introduction Patient-based costing seeks to measure the cost of care at the level of the individual patient rather than by broad departmental or specialty averages. In methodological terms, activity-based costing (ABC) assigns costs to activities and then to cost objects through cost drivers, whereas time-driven activity-based costing (TDABC) simplifies this logic by combining two core parameters: the cost of supplying resource capacity and the time required to perform the activities in the care process. In healthcare, TDABC has become especially relevant because it is explicitly tied to process mapping and the measurement of real care delivery across pathways. For Belgian hospitals, the policy relevance of patient-level costing is unusually high. Belgium still allocates a major part of hospital financing through an APR-DRG/SOI-based budget allocation whose weights are based on average length of stay (LOS) rather than cost weights. The Belgian Health Care Knowledge Centre (KCE) has...

1. Introduction Major Diagnostic Categories (MDCs) and Diagnosis-Related Groups (DRGs) underpin prospective (case-based) payment by assigning inpatient stays to clinically coherent groups and paying a predetermined amount based largely on a relative weight (resource intensity) multiplied by a standardized/base rate, with further policy adjustments (e.g., wage index, teaching, disproportionate share, outliers). Under Medicare’s Inpatient Prospective Payment System (IPPS), for example, the US  Office of Inspector General (OIG) in the USA describes the operational payment logic as “DRG weight × standardized amount,” with additional adjustments layered onto the base payment. Prospective payment improves cost discipline, but it also creates predictable gaming surfaces: when revenue depends on coded diagnoses/procedures and discharge status, some actors can increase payment by manipulating codes, fragmenting bills, or selecting “profitable” patients (cherry picking/lemon dropping). The ...

Introduction Diagnosis-Related Group (DRG) payment systems depend on relative weights that approximate the average resource intensity of clinically coherent inpatient groups. When weights are weak - because costing is inconsistent, feeds are incomplete, or coding is unreliable - national tariffs can misprice care, destabilize provider incentives, and reduce confidence in performance analytics. In this essay I try to  synthesize established approaches to patient-level costing (PLICS/ABC/TDABC) and DRG tariff setting, drawing on documented national programs (e.g., England’s National Cost Collection, Australia’s AHPCS/NEP process, and Germany’s InEK cost accounting scheme), and propose an implementable framework to (1) produce reliable national reimbursement weights, (2) embed auditability via a practical controls checklist (General Ledger (GL)  reconciliation, feed completeness, allocation governance, coding QA/QC), and (3) operationalize patient-level costs for internal hospita...