Belgian KCE report on expenditure control measures in DRG-based hospital payment systems

On December 20, 2024, the Belgian Health Care Knowledge Center (KCE) released the Health Services Research report on expenditure control measures in Diagnosis-Related Group (DRG)-based hospital payment systems. The report offers an overview of the current hospital financing model in Belgium, details proposed reforms toward case-based DRG payments, reviews expenditure control mechanisms in five European countries, and provides recommendations to stakeholders.

The reform of the hospital financing system has been discussed by Belgian authorities for several years. The current system is extremely complex and not transparent enough. It is also no longer adapted to the changing needs of an aging population that is increasingly prone to chronic diseases and multimorbidities. The reform proposed by the Minister of Social Affairs and Public Health stipulates that the current payment system will be replaced by a DRG-based payment case-by-case. 

The KCE report, requested by the Minister of Social Affairs and Public Health, focuses on mechanisms to control unnecessary hospital admissions and prevent budget overruns under a DRG-based payment system. The KCE examined control measures in five countries: Germany, Estonia, France, Hungary, and Italy (Lombardy region).

The studied countries employ three main control mechanisms:

• Strict budget limits with tariff reductions (France) - when the national budget limit is exceeded, the tariff per DRG is reduced (linearly) the following year so as to remain within the budget limits;
• Volume caps (Italy-Lombardy) - the number of hospital admissions is subject to a predetermined limit. For each admission or treatment up to this limit, hospitals are paid the full DRG tariff (100%). Once this threshold is exceeded, they are no longer paid. This system limits the number of hospital admissions during the budget period;
• Volume-based price caps (Germany, Hungary, Estonia) - this hybrid model combines aspects of tariff reduction and volume capping. Once a certain threshold of admissions is reached, hospitals receive a progressively lower tariff for each additional admission. For care that does not exceed the threshold, they receive the full tariff. In this system, hospitals continue to receive funding once the cap is exceeded, but the amount they receive declines in a controlled manner.

Based on international analyses and consultations with Belgian stakeholders, the KCE provided recommendations to the Minister of Social Affairs and Public Health, including the following:

• Introduce volume-based price caps when adopting DRG tariffs per admission;
• Ensure DRG tariffs reflect justified costs of care by collecting cost data from representative hospitals and determining which costs (direct and indirect) are included;
• Define which hospital departments, services, products, and patient groups are covered by DRGs, and outline exceptions (and their payment mechanism), e.g., for complex, rare, or costly care, such as high-cost medicines;
• Incorporate patient characteristics (e.g., age, socioeconomic status) into DRG financing through tariff adjustments or other mechanisms.

See the full details here.

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