This study assessed the potential impact of the federal neonatal diagnosis-related group (DRG) pricing system upon reimbursement to a state neonatal intensive care program. Data for length of intensive care unit stay, procedures, hospital charges, and audited cost reports from the state of Florida's ten regional neonatal intensive care centers were analyzed for 8,492 neonates whose charges totaled $118 million. Mean lengths of stay in these tertiary care centers were substantially longer than those reported for the federal DRGs, which were based on community hospital data. If federal DRG-based reimbursement to hospitals were implemented in Florida's perinatal intensive care program, compensation would range from 9% to 56% of actual hospital care charges. Federal DRG price rates were not predictive of hospital charges. Only 16% of the total variation in hospital charges was explained by differences among federal DRG rates ( R 2 = .16). Analysis of data by major determinants of resource consumption provided groups more homogeneous with respect to hospital charges and, hence, cost. Therefore, we developed a prospective pricing system that used modifications of federal newborn DRG system. These modifications resulted in a threefold increase in R 2 (.52). Our proposed system permits prediction of cost and reimbursement for infants by three criteria: (1) birth weight, (2) need for mechanical ventilation and/or major surgery, and (3) survival status and length of survival for those who die.
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