Healthcare providers in Dubai must prepare for the imminent shift to international refined diagnosis-related group (IR DRG) system or be caught off-guard when pricing structures change in 2018, said a new report.

The new structure will completely transform insurance companies' payment approach to healthcare providers. It aims to eliminate over prescription by moving the burden of cost to the provider itself. In short, providers will be paid a fixed base rate, multiplied by a factor for each DRG code, according to the analysis by Frost & Sullivan, a growth partnership company.

"To make their margins, healthcare providers now have to work backwards from the price they will get paid. They will also need to firmly control their costing for each procedure. Failure to do so will result in lower or no margins. Moreover, this must be done without compromising the quality of care and outcome," said Frost & Sullivan Healthcare and Life Sciences senior consultant Vivek Shukla.

Frost & Sullivan's Healthcare and Life Sciences team, with its expansive coverage and expertise of the global healthcare industry, finds that even the most efficient hospitals will have areas of improvement when it comes to overall cost optimization.

As fixed prices replace fee-for-service, and price-based costing substitute cost-based pricing, providers must prepare early to garner maximum benefit. Healthcare providers that are clear about cost structures and effectively manage without giving up on quality will gain the competitive edge over contemporaries. Healthier margins mean higher capacity to invest in better doctors and staff, brand building, and equipment. This will enhance the perception, quality and outcomes of hospitals, giving them an even higher strategic ground.

To comply with the new insurance environment and stay profitable when the prices get fixed for various procedures, healthcare providers must:

Immediately deploy costing tools: As base rates and multiples will be assigned on the basis of rates during and before the shadow-billing phase, costing tools can offer clarity on the margins of the procedures being performed and strengthen cost management

Scrutinize and reset processes: Everything from operational flows, supply chain, work force utilization, and equipment maintenance must be scanned to assess obvious and hidden cost drivers for corrective action

Rethink service mix and refresh marketing: As efficiencies in various departments or service lines are streamlined, the service mix may change, compelling fresh marketing efforts and realignment of future plans

Re-engineer budgets: The way budgets are created and revenues and costs allocated will change as the basis for future calculations are altered

Overall, transitioning to IR DRG will require months of careful preparation. As such, market opportunities will emerge around solutions to support hospitals in cost reduction and revenue cycle management. – TradeArabia News Service