Adjusting case mix payment amounts for inaccurately reported comorbidity data

Case mix methods such as diagnosis related groups have become a basis of payment for inpatient hospitalizations in many countries. Specifying cost weight values for case mix system payment has important consequences; recent evidence suggests case mix cost weight inaccuracies influence the supply of some hospital-based services. To begin to address the question of case mix cost weight accuracy, this paper is motivated by the objective of improving the accuracy of cost weight values due to inaccurate or incomplete comorbidity data. The methods are suitable to case mix methods that incorporate disease severity or comorbidity adjustments. The methods are based on the availability of detailed clinical and cost information linked at the patient level and leverage recent results from clinical data audits. A Bayesian framework is used to synthesize clinical data audit information regarding misclassification probabilities into cost weight value calculations. The models are implemented through Markov chain Monte Carlo methods. An example used to demonstrate the methods finds that inaccurate comorbidity data affects cost weight values by biasing cost weight values (and payments) downward. The implications for hospital payments are discussed and the generalizability of the approach is explored.