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Capital structure and hospital case-mix model


Since 1976, the first time that the case-mix was designed by the United States Yale University, the paying style based on DRGs has been vigorously promoted and continuously updated in the United States, Britain and Australia. In recent years, some places carried out a single disease trial limit system for some diseases, but it could not be effectively promoted.

1. The sources of hospital funding and the analysis of its composition

Jing Tong City Tumor Hospital is a specialist oncology hospital. Its actual beds have been up to 800. The total assets of the hospital are nearly 300 million Yuan. In 2008, the total revenue is 202.88 million Yuan, its financial assistance income of which is 14,371,300 Yuan, with the business income 188,510,000 Yuan. The annual total expenditure is 201.91 million Yuan, and 969,000 Yuan to achieve the balance.

The hospital's main source of funding is from its own business income, and a very small amount of financial assistance income. The third source of funds is to borrow money with bank borrowings, finance leases and so on.

1) Business revenue

Business income includes the health care, pharmaceuticals and other income. Medical income is the revenue that the hospital achieves when it carries out medical operations, including the registered income, bedspace income, exam income, check income, treatment revenue, operation income, testing income, care income and other income. Drug income is the part that derived from sales of drugs. Others are from training, waste products and so on.

In 2008, the hospital has business income 188,510,000 Yuan, of which: medical income 75,880,000 Yuan, accounting for 40.3% of operating income. Drugs income is 103,170,000 Yuan, accounting for 54.7%. Other income is 9,460,000 Yuan, accounting for 5% of operating income.

2) The composition of the pharmaceutical income

The distribution of income according to their health care is divided into different income and out-patient hospital revenue.

According to the different distribution, the Drug income is divided into the hospital in-patient income and out-patient pharmaceutical income. In 2008, outpatient drugs revenue is 71,740,000 Yuan, accounting for 40% of revenue, in-patient revenue is 61,430,000 Yuan, accounting for 60%.

3) The classification according to the medical insurance and the non-medical insurance

Income of the entire health care, pharmaceuticals income are divided into Medicare income and non-Medicare health insurance based on whether or not medical care centers pay the cost. Medicare revenue is from the urban workers and urban residents in the basic medical insurance, their bills are set up by the health insurance center and hospital for the cost of settlement; income refers to the broad masses of non-Medicare patients who see a doctor in rural areas. While in rural areas using a new type of rural cooperative medical way, farmers can reimburse certain medical expenses, hospital patients must advance their own medical expenses.

Facing the fierce market competition, hospitals should actively expand the funding sources and channels. First of all, they should actively enhance the level of medical technology and services to continuously improve hospital service quality and then to occupy the medical market, because business income is the main source of hospital funding. Secondly, by continuously strengthening internal management, actively strengthening the connotation of construction, the hospitals can increase revenue and reduce expenditure, ensuring the rational use of funds and reducing the operating costs. Thirdly, hospitals can also increase sources of funding with appropriate borrowing. In order to adapt to the evolving health needs, the hospitals have to expand health care market share. They can expand properly under the condition of borrowing from the bank.

2. The possible pros and cons of Case-mix funding model

Taking the Jing Tong Tumour Hospital as an example, if it uses case-mix funding model to replace the current payment of funds by the project model, the potential beneficial aspects are:

1) It is propitious to reduce the financial burden of patients.

DRG achieves the standardization of hospital resource utilization through the unified classification criteria for a fixed payment. It makes use of the imprest method instead of prepaid services by way of an ex post facto compensation, so that the hospital loses the repeat charges, charges decomposition, induced by the interests of consumer motivation. And the hospital income policy has a fundamental change, that is, from the maximum increase revenue, into in accordance with the provisions of DRG charge.

2) It is conducive to reduce the number of days hospitalized.

After the implementation of DRG, the hospital will try to shorten the length of stay of patients to reduce medical costs. The United States achieved the implementation of DRG and summed up that the in-patient rate of the elderly aged over 65 declined 2.5% per year, and the average number of days hospitalized from the average l0.2 days in 1982, shortened to 8.9 days in 1987. In 1995, under the combined effects from other methods to control of the price, the average length of days has been shortened to 6.7 days.

3) It is also conducive to improve the medical technology.

After the implementation of DRG mode, as the fixed cost of each case, it would be a very realistic thing for the hospital how to use a more appropriate medical technology to solve the problems of patients in a more low-cost. Therefore, the hospital is bound to take the initiative to introduce new technologies, learn from others of the advanced practice, research and use the most advanced technology to minimize costs.

4) It is good for the hospital to improve its management level.

As we all know, among the management of public hospitals, there are many loose management or overstaffing problems. So the implementation of DRG will put a halter to the unlimited increasing cost of public hospitals. Only by strengthening the management, realizing the scientific management, and improving the effects, the hospital can survive and develop.

At the same time, the case-mix funding model based on DRGs may cause a number of issues:

1) DRGs only consider medical expenses payment system, with the lack of medical quality control. Both the link quality and the end quality, it is difficult to control quantitatively. In addition that it can not be accurately measured for the short-term efficacy and long-term efficacy. So the cost not linked to quality is very difficult to say that it is reasonable.

2) DRGs can not reflect the severity of illness of the patients during the period. Due to the complexity of disease and specificity of individuals, this payment method has obvious limitations, for example, if the patients have complications, how to pay for the treatment can not be solved.

3) DRGs lead the hospital to select adversely. Just because of the problems above, the hospitals are often reluctant to treat the disease complex and critically ill patients, and more willing to treat patients with relatively minor illness, which is the so-called adverse selection of patients.

4) The current domestic cost estimation systems of the medical institutions are not wholesome, and the hospital information system data find it difficult to support the cost estimates on the disease. At present, our hospital's cost accounting methods are generally rough. Most did not enter the stage of full-cost accounting, so

It is rather difficult to estimate the cost of diseases. Hospital HIS system is also unable to estimate the cost of disease.


Under the present circumstances, DRGs tells us that in the hospital financing system, we can draw its essence from the current pay-by project, and gradually transition to a mode that multiple payment methods can work together, such as payment in accordance with per capita or diseases. When the conditions are ripe, we can establish the most scientific and reasonable way to pay.


1. Gao Xiao Feng &Li Jian, "The case-mix mode research on the integrative effects assessment", China Health Care Statistics, 2007, 6th.

2. Gao Xiao Feng, etc, "Comparative Study of Costs by Case-mix Model for Stroke Inpatients", Chinese Journal of Evidence-Based Medicine.

3. J Cheah, Y C Chee Case, "Mix - For Better or for Worse?" Singapore Med J 1999; Vol 40(01)