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PubMed1984

Medicare program; prospective payment for Medicare inpatient hospital services--HCFA.

This final rule amends the Medicare regulations published as an interim final rule on September 1, 1983 (48 FR 39752). Those regulations implement Title VI of the Social Security Amendments of 1983 (Pub. L. 98-21), which changed the method of payment for inpatient hospital services from a cost-based, retrospective reimbursement system to a prospective payment system based on diagnosis. The changes contained in this final rule result from our consideration of the public comments that were received in response to the interim final rule.

Centers for Medicare and Medicaid Services, U.S.↗

PubMed1985

Severity of illness within DRGs: impact on prospective payment.

This study compares the financial impact of a Diagnosis Related Group (DRG) prospective payment system with that of a Severity of Illness-adjusted DRG prospective payment system. The data base of about 106,000 discharges is from 15 hospitals, all of which had a Health Care Financing Administration (HCFA) DRG case mix index greater than 1. In order to pool the data over the 15 hospitals, all charges were converted to costs, normalized to Fiscal Year 1983, and adjusted for medical education and wage levels. The findings showed that, for the study population as a whole, DRGs explained 28 per cent of the variability in resource use per case while Severity of Illness-adjusted DRGs explained 61 per cent of the variability in resource use per case. When we simulated prospective payment systems based on DRGs and on Severity-adjusted DRGs, we found that the financial impact of the two systems differed by very little in some hospitals and by as much as 35 per cent of total operating costs in other hospitals. Thus, even with a data set that is relatively homogeneous (with respect to the HCFA DRG case mix index definition of hospitals), we found substantial inequities in payment when DRGs were not adjusted for Severity of Illness. These findings suggest that, with a more representative set of hospitals, the difference between unadjusted and Severity-adjusted DRG-based prospective payment could be greater than 35 per cent of a hospital's total operating costs.

Costs and Cost Analysis↗

PubMed1993

Effects of price regulation on stock returns of publicly traded companies in the healthcare industry.

During the 1980s, governmental changes were enacted to suppress the rising costs of healthcare. The primary forms of legislation were the implementation of the Prospective Payment System (PPS), the passage of Deficit Reduction Act and the proposal to shift capital costs to a prospective payment system. The main emphasis of the study is to examine the price reaction of hospital management companies for the above governmental changes. Using an intervention analysis, the findings show that the market reacted negatively at the passage of PPS and the future proposal to implement capital costs on a prospective basis for hospital management companies. In addition, hospital management companies level of risk increased for all the key event dates.

Capital Expenditures↗

PubMed1991

The resource utilization group system: its effect on nursing home case mix and costs.

Using data from 1985 and 1986, we examine how New York state's prospective payment system affected nursing homes. The system, called Resource Utilization Group (RUG-II), aimed to limit nursing home cost growth and improve access to nursing homes by "heavy-care" patients. As in Medicare's prospective hospital reimbursement system, payments to nursing homes were based on a "price," rather than facility-specific rates. With respect to cost growth, we observed considerable diversity among homes. Specifically, those nursing homes most financially constrained by the RUG-II methodology exhibited the slowest rates of cost growth; we observed higher cost growth among the homes least constrained. This higher rate of cost growth raises a question about the desirability of using a pricing methodology to determine nursing home payment rates. In addition to moderating cost growth, we also observed a significant change in the mix of patients admitted to nursing homes. During the first year of the RUG-II program, nursing homes admitted more heavy-care patients and reduced days of care to lighter-care patients. Thus, through 1986, the RUG-II program appeared to satisfy at least one of its major policy objectives.

Aged↗

PubMed1998

Payment reform will shift home health agency valuation parameters.

Changes authorized by the Balanced Budget Act of 1997 have removed many of the payment benefits that motivated past home health agency acquisition activity and temporarily have slowed the rapid pace of acquisitions of home health agencies. The act required that Medicare's cost-based payment system be replaced with a prospective payment system (PPS) and established an interim payment system to provide a framework for home health agencies to make the transition to the PPS. As a consequence, realistic valuations of home health agencies will be determined primarily by cash flows, with consideration given to operational factors, such as quality of patient care, service territory, and information systems capabilities. The limitations imposed by the change in payment mechanism will cause acquisition interest to shift away from home health agencies with higher utilization and revenue expansion to agencies able to control costs and achieve operating leverage.

Accounts Payable and Receivable↗

PubMed1985

DRGs and prospective payment under Medicare.

In moving from cost-based reimbursement to a DRG-based prospective system, the Medicare Prospective Payment System (PPS) has radically restructured the financial incentives for the care of patients. The incentives potentially may lead to increased hospital admissions, decreased lengths of stay, decreased volume of services to some individuals, service shifts outside the hospital, and increased selectivity/specialization by hospitals in limited DRGs. The Prospective Payment Assessment Commission (ProPAC) is charged with evaluating important issues and factors affecting the implementation of the PPS and with making recommendations for improving system performance.

Cost Control↗

PubMed1985

RUGs and "Medi-Cal" systems for classifying nursing home patients.

Medicare and most state Medicaid programs currently use indirect case-mix measures to determine reimbursement for nursing home care. In the future, however, they probably will incorporate more direct case-mix measures into their payment systems. Care must be exercised in designing a case-based prospective payment system to ensure that its financial incentives motivate providers to expedite recovery, prevent deterioration, and admit heavy-care patients. For example, although use of a services-rendered approach helps guarantee that care will be provided when needed, it also offers providers an incentive to furnish a service regardless of whether it is in the patient's best interest. Consideration must be given to the frequency with which patients are reassessed. The implications of the timing of reassessments for quality of care also must be studied. Ideally, quality would be measured on an outcome basis--that is, payment would depend on whether targeted goals for individual patients are reached--rather than on structural or process measures alone. Two recent classification systems--Resource Utilization Groups and Medi-Cal groups--may serve as models for case-based prospective payment systems. Each method classifies patients into distinct, meaningful categories based on activities of daily living and services received.

California↗

PubMed1997

Assessing the strategy-performance paradigm: implications for organizational adaptation in discontinuous environments for home health care providers.

Home health care agencies are on the brink of experiencing prospective payment systems which will prove to be a major environmental shift. What will be the best strategy to offset the effects of prospective payment systems? Longitudinal studies of hospitals facing similar pressures may offer the best solution. This paper offers an attempt to address whether proactive or low cost strategies will provide home health agencies with higher firm performance after prospective payment systems.

Health Care Costs↗

PubMed1994

[The framework Prospective Payment Information Systems: bias, sources of errors and consequences].

This paper reviews: 1) the biases linked to the definition method of the Diagnosis Related Groups (DRG), and the biases due to the implicit hospital model of the French programme medicalizing hospital information system (PMSI) which limit its use in hospital management; 2) the sources of errors met in use in the different kinds of data networks when collecting administrative data from medical discharge abstracts, which can induce mistakes in patient hospitalization counts and in the representation of medical units contribution to patients care; 3) the sources of errors in collecting medical informations from medical discharge abstracts can make the patient hospitalizations classified in DRG unrepresentative or uninterpretable; 4) the problems linked to the interpretation of the indicators estimated from the DRGs in hospital management and financial allocation.

Bias↗

PubMed1993

American Health Information Management Association. Position Statement. Issue: roles of health information managers and coders in patient-focused care.

Patient-focused care is a new model of care delivery organized around the patient instead of the hospital structure. Care is provided by multi-disciplinary teams of healthcare workers on the patient care unit. As many services as possible are brought to the patient, rather than taking the patient to a decentralized department. Successful models have demonstrated increased operational efficiency and greater levels of satisfaction among patients, physicians, and staff members. Administrative tasks done in a variety of departments may be assigned to a member of the care team. Such tasks may include patient registration; insurance verification and financial arrangements; and medical record assembly, analysis, abstracting, and coding. Given the different educational levels and prior training administrative team members may have, careful consideration must be given to assignment of the medical record abstracting and coding functions. The quality of clinical data submitted by all providers in the US is critically important to the future of the nation's healthcare system. Under prospective payment systems, the accuracy of clinical data abstracting and coding has a significant impact on healthcare facilities. But the need for accurate clinical data goes beyond payment systems. As more and more clinical data are being captured and maintained in databases across the country, for uses that may be yet unknown, it is essential that such data be collected consistently and accurately. To assure the quality and validity of health information, only trained, experienced coders should abstract and code the data.(ABSTRACT TRUNCATED AT 250 WORDS)

Medical Record Administrators↗

PubMed1996

Understanding the financial implications of APGs (ambulatory patients groups).

The ambulatory patient group (APG) system, a new prospective payment system for reimbursing outpatient services, is being adopted by increasing numbers of third-party payers and may soon be used in the Federal Medicare program. APGs involve the grouping of healthcare services provided during a specified service period. Payment rates are complicated by the assigning of multiple APGs to a single patients encounter and by discounting schedules. APG cost management tools must be developed to assess the financial impact of this complex system.

Ambulatory Care↗

PubMed1998

Reforming home health care.

The Balanced Budget Act of 1997 currently limits Medicare payments to home health agencies through an interim payment system and authorizes future implementation of a prospective payment system. These new payment systems and the growing influence of managed care are forcing home health agencies to make difficult decisions about restructuring their organizational philosophies and operations to create a more cost-conscious environment.

Aged↗

PubMed1988

DRGs as a basis for prospective payment.

Hospital care in Europe has for a number of years been changing towards prospective payment systems. The mechanisms of implementing PPS varies between countries and between health care systems. In the United States prospective payment for hospital care under Medicare was jointly introduced with DRGs being the basis for payment. The combined power of both techniques seems to surpass significantly the individual power of independent applications of PPS and DRGs. The DRG classification system is now the subject of experimentation and research in approximately 16 European countries. The prospects for case-mix measurement and prospective payment in Ireland are discussed in more detail.

Diagnosis-Related Groups↗

PubMed1998

Discharge destination and motor function outcome in severe stroke as measured by the functional independence measure/function-related group classification system.

OBJECTIVES: Function-related groups based on the Functional Independence Measure have been proposed as a model for a prospective payment system for medical rehabilitation. This study describes discharge destination and motor function outcomes in a sample of patients with stroke from the FIM-FRG STR1 classification. STUDY DESIGN: A retrospective review of 293 cases of stroke from the years 1993 to 1995. The demographic and outcome characteristics of this sample were described. RESULTS/CONCLUSIONS: Forty-five percent of the patients were discharged to home after a mean length of stay of 23.8 days in acute medical rehabilitation. Patients who were discharged home had higher admission and discharge motor FIM scores than those discharged to a subacute facility or long-term care facility, although the correlation between motor FIM score and discharge destination was low to moderate. Median discharge motor FIM scores indicate considerable residual disability in this classification after rehabilitation. Research problems that address methods to improve the usefulness of the FIM-FRG system in a prospective payment system are discussed.

Activities of Daily Living↗

PubMed1990

Medicaid payment rates for nursing homes, 1979-86.

The issue of the cost containment effects of payment systems on per diem payments by Medicaid to nursing homes is addressed. Estimates of real payment rates as a function of broadly defined payment system classifications and economic and demographic variables using State-level data are presented. Little support for the notion that prospective payment systems substantially restrain payment rates for intermediate care facilities is found, but some model specifications indicate possible cost savings associated with prospective payment systems for skilled nursing facilities. Significant methodological concerns that need to be addressed in future research on the cost containment effects of payment systems are also discussed.

Cost Control↗

PubMed1990

The production of health care services and changing hospital reimbursement. The role of hospital-medical staff relationships.

The production of health care services has the unique feature that physicians do not face explicit costs for hospital inputs. This paper develops models of the production process given alternative hospital and medical staff relationships, and analyzes the impact of the change in hospital reimbursement under Medicare from a cost-based system to the Prospective Payment System (PPS). A basic theoretical result finds that the switch to PPS forces physicians to alter their input mix, changing both physician and hospital income. The effects of the introduction of PPS on hospital inputs, physician income, and hours of work are empirically examined.

Cooperative Behavior↗

PubMed1988

The impact of DRGs on the cost and quality of health care in the United States.

The prospective Payment System (PPS) represents a fundamental change in the way the United States government reimburses hospitals for medical services covered under Medicare, a federal health care insurance program for the elderly and disabled. PPS replaced the retrospective cost-based system of payment for Medicare services with a prospective payment system. Under PPS, a predetermined specific rate for each discharge dictates payment according to the diagnosis related group (DRG) in which the discharge is classified. The PPS was intended to create financial incentives that encourage hospitals to restrain the use of resources while providing high-quality inpatient care. Both objectives appear to have been met under PPS. Hospital utilization has declined, average length of stay has fallen, and the locus of care has shifted from the inpatient setting to less costly outpatient settings. The growth in inpatient hospital benefits has slowed and the impending insolvency of the Medicare trust fund has been forestalled. Studies have found no deterioration in the quality of care rendered to Medicare beneficiaries. Neither the mortality rate nor the rate of re-admission (presumably related to premature discharge) increased under PPS. Indeed, PPS appears to have enhanced the quality of inpatient care by discouraging unnecessary and potentially harmful procedures, and by encouraging the concentration of complex procedures in facilities in which the high frequency of these procedures promotes efficiency. Incentive-based reimbursement also appears to have contributed to the growth in alternative delivery systems, such as HMOs and PPOs, which contain costs by maintaining a high volume of a limited range of services. The success of the PPS/DRG system in controlling costs and promoting quality in this country suggests its application in other countries, either as a method of reimbursement or as a product line management tool.

Diagnosis-Related Groups↗

PubMed1999

Provisions of the Balanced Budget Act challenge IDS care coordination patterns.

Provisions of the Balanced Budget Act of 1997 that focus on postacute services have important ramifications for integrated delivery systems (IDSs) because changes in payment rates for such services create financial incentives to alter patient-flow patterns among acute and postacute care services. In particular, IDSs should understand the provisions of the act that deal with a prospective payment system for skilled nursing services, the definition of a transfer from an acute care hospital, interim and prospective payment systems for home health care, limits imposed by the 1982 Tax Equity and Fiscal Responsibility Act for acute rehabilitation providers, a PPS for acute rehabilitation providers, TEFRA limits for long-term acute care, and limits on outpatient therapy services.

Ambulatory Care↗