Adjusting hospital reimbursements to the onset of a new disease: Lesson from Covid-19

The COVID-19 pandemic represented a significant shock to healthcare systems, which faced substantial challenges on multiple fronts. In addition to organizational and clinical issues, one important challenge that required attention was adapting hospital service reimbursement systems to address a new disease with initially unknown costs and consequences. In this paper, we quantify the gap between DRG tariffs and the actual hospitalization costs of COVID-19 cases, through a comparison with pre-COVID-19 cases of respiratory tract infections, at San Martino Polyclinic Hospital, Genoa, Italy. We collected and analyzed a unique administrative dataset comprising Hospital Discharge Records (HDRs). We used propensity score matching to compare health outcomes and hospitalization costs of patients with confirmed SARS-CoV-2 pneumonia and patients in a control group of pre-COVID-19 patients with similar characteristics. We found that COVID-19 infection leads to a higher probability of being admitted to the Intensive Care Unit (ICU) and death, fewer days of hospitalization, increased hospital services, and increased costs of these services. Factors that increased hospitalization costs included female gender, age group 65-74 years, being admitted to ICU, death, increased length of stay (LOS), and the association between mechanical respiration DRGs and COVID-19 infection. In the period examined, DRG reimbursements were underestimated in severe COVID-19 cases requiring mechanical respiration. Knowledge of the factors that influence COVID-19 hospitalization costs may lead to a more comprehensive DRG tariff and, overall, to more effective management of financial resources in the event of future similar outbreaks.