Abstract
In FY 1984 the Medicare program implemented a new method of reimbursing hospitals for inpatient services, the Prospective Payment System (PPS). Under this system, hospitals are paid a predetermined amount per Medicare discharge, which varies according to certain patient and hospital characteristics. This article investigates the presence of systematic biases and other potential imperfections in the PPS reimbursement methodology as revealed by its effects on Medicare operating ratios. The study covers the first three years of the PPS (approximately 1984-1986) and is based on hospital data from the Medicare cost reports and other related sources. Regression techniques were applied to these data to determine how Medicare operating ratios were affected by specific aspects of the reimbursement methodology. Several possible imbalances were detected. The potential undercompensation relating to these can be harmful to certain classes of hospitals and to the Medicare populations that they serve.
Full text
PDF
Selected References
These references are in PubMed. This may not be the complete list of references from this article.
- DesHarnais S. I., Chesney J. D., Fleming S. T. Should DRG assignment be based on age? Med Care. 1988 Feb;26(2):124–131. doi: 10.1097/00005650-198802000-00004. [DOI] [PubMed] [Google Scholar]
- DesHarnais S., Kobrinski E., Chesney J., Long M., Ament R., Fleming S. The early effects of the prospective payment system on inpatient utilization and the quality of care. Inquiry. 1987 Spring;24(1):7–16. [PubMed] [Google Scholar]
- Feder J., Hadley J., Zuckerman S. How did Medicare's prospective payment system affect hospitals? N Engl J Med. 1987 Oct 1;317(14):867–873. doi: 10.1056/NEJM198710013171405. [DOI] [PubMed] [Google Scholar]
- Guterman S., Dobson A. Impact of the Medicare prospective payment system for hospitals. Health Care Financ Rev. 1986 Spring;7(3):97–114. [PMC free article] [PubMed] [Google Scholar]
- Lave J. R. Is compression occurring in DRG prices? Inquiry. 1985 Summer;22(2):142–147. [PubMed] [Google Scholar]
- Long M. J., Chesney J. D., Ament R. P., DesHarnais S. I., Fleming S. T., Kobrinski E. J., Marshall B. S. The effect of PPS on hospital product and productivity. Med Care. 1987 Jun;25(6):528–538. doi: 10.1097/00005650-198706000-00007. [DOI] [PubMed] [Google Scholar]
- Moscovice I. S. Rural hospitals: a literature synthesis and health services research agenda. Health Serv Res. 1989 Feb;23(6):891–930. [PMC free article] [PubMed] [Google Scholar]