Gaming, Accountability and Trust: DRGs and Activity‐Based Funding in Norway

• Author: Per Lægreid,Simon Neby
• DOI: http://doi.org/10.1111/faam.12080
• Published date: 01 February 2016
• Date: 01 February 2016

Financial Accountability & Management, 32(1), February 2016, 0267-4424

Gaming, Accountability and Trust:

DRGs and Activity-Based Funding

in Norway

PER LÆGREID AND SIMON NEBY∗

Abstract: This paper examines a particular performance management instrument

in Norway: DRGs used in conjunction with activity-based funding of hospitals. We

ask whether this system creates opportunities for undesirable gaming practices, how

accountability arrangements deal with gaming, and how trust and institutional logic

may help to explain anomalies and their resolve. From an instrumental and cultural

perspective, we examine six Norwegian cases of gaming and two governmental

assessments of coding and activity-based funding. Current solutions do provide

gaming opportunities, in a highly complex accountability setting. Accountability

arrangements highlight tensions between trust and distrust, rather than resolving

the balance between individual goals and collective norms.

Keywords: gaming, accountability, DRGs, performance management, trust

INTRODUCTION

In this paper, we investigate the track record of a particular performance

management system in a specific setting: the Diagnosis Related Groups system

(DRG) used in conjunction with activity-based funding (ABF) in the Norwegian

hospital system. We are interested in three particular issues and ask the

following research questions: Firstly, as the registration and coding of medical

activity is connected to health economics and the funding of hospitals; do

the DRG and activity-based funding systems create opportunities for actors

to game the system? Secondly, when gaming is revealed, how is it dealt with

in terms of accountability in the larger system of governance? Thirdly, we ask

∗The first author is from the Department of Administration and Organization Theory,

University of Bergen. The second author is from the Uni Research Stein Rokkan Centre

for Social Studies.

Address for correspondence: Simon Neby, Uni Research Rokkan Centre, Nyg˚

ardsgt. 5,

N-5015 Bergen, Norway.

e-mail: simon.neby@uni.no

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58 LÆGREID AND NEBY

how malfunctioning of DRGs and accountability processes are connected to

institutional logic and trust in the rather complex setting of Norwegian hospital

governance.

We examine six individual cases that received media coverage in the period

2003–2012. The cases concern hospital officials accused of engaging in illegal,

unethical or other questionable ways of gaming the DRG system in order to

obtain some form of irregular benefit. We also assess performance audits by

the Auditor General and a national revision of the system of coding practices

carried out by the Directorate of Health and the regional health trusts. The

inclusion of these is motivated by the need to understand the relative scale

and scope of gaming and to illustrate the connection between narrow aspects of

organizational behavior and the larger context of public accountability. In order

to grasp the NPM twist in Norwegian hospital governance, we have selected

cases and processes that occurred following the introduction of a number of

reforms around the turn of the millennium, which included DRGs and activity-

based funding as well as changes in hospital ownership, governance structure,

and management.

Activity-based funding is a two-step scheme that builds on the Diagnosis

Related Groups (DRG) system, an administrative tool developed to register,

aggregate and handle information about hospital activity (Kimberly et al., 2008).

The activity-based funding (ABF) scheme connects this data to funding: funding

is based on DRG typologies that carry standardized pricing, thus relying on

the coding and recording of performance. The money thus ‘follows the patient’

in a process aimed at facilitating patient mobility, increasing productivity, and

improving cost efficiency, quality and transparency (Byrkjeflot and Torjesen,

2010; and Busse et al., 2011). DRGs are not only coupled to cash flows, however,

but also function as performance assessments. Accruing DRG points is used as a

measure of productivity (Fetter and Freeman, 1986), which is also an important

function of the system in Norway (Løkeland, 2013). The system relies on two

principles: that medical information is available and possible to process, and that

the calculation of activity based funding actually reflects hospital expenditure.

Thus, the basic assumption is that there is clear consistency between medical

activity (diagnosis and treatment), the recording of this information in patient

journals, the coding of information in the DRG system, and the calculation and

allocation of funds. The term DRG has become synonymous with activity-based

funding, although the distinction between them is useful in the Norwegian

system, which combines activity-based funding with block grants allocated

through political processes.

First, we present the methodological approach that underpins the study.

Secondly, we introduce the Norwegian context, highlighting recent reforms

and outlining the DRG/ABF system. Thirdly, we present our conceptual and

theoretical approaches. The thesis is that DRGs and activity-based funding

are examples of discretionary practice embedded in a political context. For

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2016 John Wiley & Sons Ltd