DRG cost weights — getting it right

Synopsis Inadequate cost weights are a major problem in casemix funding systems. Clinicians should understand the basis for the cost weights underpinning the hospital payment system in their State and their own hospital. Clinician managers need valid patient costing data if they are to benchmark and improve cost‐effectiveness while maintaining and enhancing quality. The cost model approach for determining cost weights has inherent limitations, and, the alternative, detailed patient costing, requires efficient hospital information technology systems. A simplified approach to patient costs, which uses existing hospital data systems, may be useful for smaller hospitals. A better classification system and funding formulas incorporating reliable cost weights derived from patient costing should overcome many of the deficiencies in the current casemix payments systems.