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By 1998, a Medicare prospective payment system for home care is expected to be in place. Physicians must become more involved in home care, because they will be held accountable for the patients they refer and the services they order.
This was a brief overview of the prospective payment system. Again, this overview was designed as a tool for an in-service educational program. Certainly not all of the complexities of the prospective payment system were discussed in this article. Many more items could be expanded upon, such as attestation, length of stay, and coding functions. At the end of the presentation, it is suggested that you invite the nursing staff to your department to view the coders and/or the utilization review process. An orientation to the HIM or Medical Record Department for the nursing staff could be an excellent way to open the door for more communication and teamwork.
Since 1983, when Congress established the Medicare DRG-based Prospective Payment System (PPS) for inpatient hospital care, rehabilitation hospitals and units that qualify under federal regulations have been exempted from the system. Congress recognized that the DRGs were not designed to consider the specific circumstances of rehabilitation patients. It required the Secretary of the Department of Health and Human Services (DHHS) to report on the feasibility of developing a PPS for rehabilitation (and other excluded) hospitals and units. In October 1987, DHHS released its long-awaited report to Congress on "Developing a Prospective Payment System for Excluded Hospitals." The Report concludes that further research is necessary before DHHS can develop specific legislative and regulatory recommendations. Yet, the report also indicates DHHS' desire ultimately to implement a capitation-based PPS for rehabilitation. Until this goal is achieved, DHHS would like to develop a transitional PPS for rehabilitation. However, given that studies indicate that DRGs are an inappropriate basis for a rehabilitation PPS, and measures that would provide a better basis (eg, functional status or capitation) have not yet been fully developed for purposes of rehabilitation payment, it is uncertain how DHHS will achieve these goals in the short run. Until further studies are conducted, development of a transitional system appears ill-advised. Congress and DHHS should, therefore, continue to exempt rehabilitation hospitals and units until an appropriate payment system for rehabilitation can be developed.
There has been considerable public policy debate concerning the appropriate rate of adjustment to the Medicare prospective payment system for the indirect costs of graduate medical education. The model that we present in this paper represents one of the first times that the statistical technique of multiple regression has been used to establish payment rates for hospitals. We also review the alternative specifications of the model and conclude that factors other than educational programs are responsible for most of the higher costs in teaching hospitals. We conclude by making recommendations for reforming the Medicare prospective payment system.
Research was undertaken to determine the effects of hospital ownership, location, and Medicare's prospective payment system (PPS) on inpatient uncompensated care. A nonequivalent group design was used with repeated measures of uncompensated care (UNCC) on 137 system hospitals taken pre- and post-PPS. Investor-owned system hospitals demonstrated the largest increase in UNCC (37 percent) under the PPS. Results suggest that not-for-profit and investor-owned system hospitals are becoming more similar in levels of uncompensated care provided and that the PPS has had a negative effect on rural hospital profitability.
Cost effectiveness in all aspects of hospital care is necessary for survival in the 1980s. Under the new prospective payment system, the emphasis will switch from selling at a profit to increasing profits by spending less. Pharmacists need to reexamine available alternatives and new horizons in each area of distributive services, especially in the way we dispense and administer intermittent intravenous drugs. Manufacturer's piggyback containers are readily available for about 60 percent of required doses, and significant cost savings could result in a relatively short period of time. Newer systems that use syringes should also be explored and an in-hospital evaluation program set up to decide which is the most cost-effective, acceptable system.
This paper takes advantage of a unique set of annual MONITREND data from the American Hospital Association (AHA) to study the effects of Medicare's Prospective Payment System (PPS) and other public/private programs on hospital productivity and intensity between 1980 and 1987. The results on over 30 cost centers show major improvements in inpatient productivity per discharge in the first two years of PPS--improvements that are largely attributable to shifts of care to the outpatient department. Inpatient intensity, which was growing 4.5% annually between 1980 and 1982, turned negative from 1983-85 due to this shifting locus of care. Productivity per intermediate service also improved but at a slower rate because of the large declines in inpatient volumes. Productivity improvements were greater in urban hospitals, resulting in slower cost inflation and a better financial position compared with rural hospitals.
Diagnosis Related Group (DRG) hospital payment has begun to squeeze hospitals financially and is likely to do so in the future. This study analyzed the relationship between the volume of urologic procedures by an individual urologist, hospital costs per patient, and outcome. We used a three-year DRG database of urology patients (N = 2,980) at an academic medical center to analyze these. Low-volume urologists (arbitrarily defined by us) had higher hospital costs per patient, financial losses versus profits under DRGs, and a poorer outcome when compared with high-volume urologists. Pearson correlation showed a positive relationship between cost per patient and physician volume for nonemergency patients (-0.129, p less than 0.0001) and emergency patients (-0.368, p less than 0.0001). This may have been explained (in part) by a greater severity of illness for patients of low-volume urologists. These findings suggest, however, that the volume of urologic procedures per urologist may be related to hospital resource consumption. The health care financing environment of the future should provide substantial interest in this finding for those involved in the consumption of urologic services.
The Health Care Financing Administration (HCFA) has proposed incorporating hospital capital payments into the Medicare prospective payment system. HCFA's proposal includes an adjustment to capital payments for geographic differences in capital costs, derived from the prospective payment system area hospital wage index. Alternatively, the geographic adjustment could be based on an area construction cost index. Geographic construction cost indexes calculated from the cost per square foot of finished structures or from construction labor and materials input prices are evaluated in this article.
Under Norway's prospective payment system, which was in existence from 1972 to 1980, hospital costs increased 15.8 percent annually, compared with 15.3 percent in the United States. In 1980 the Norwegian national government started paying for all institutional services according to a population-based, morbidity-adjusted formula. Norway's prospective payment system provides important insights into problems of controlling hospital costs despite significant differences, including ownership of medical facilities and payment and spending as a percent of GNP. Yet striking similarities exist. Annual real growth in health expenditures from 1972 to 1980 in Norway was 2.2 percent, compared with 2.4 percent in the United States. In both countries, public demands for cost control were accompanied by demands for more services. And problems of geographic dispersion of new technology and distribution of resources were similar. Norway's experience in the 1970s demonstrates that prospective payment is no panacea. The annual budget process created disincentives to hospitals to control costs. But Norway's changes in 1980 to a population-based methodology suggest a useful approach to achieve a more equitable distribution of resources. This method of payment provides incentives to control variations in both admissions and cost per case. In contrast, the Medicare approach based on Diagnostic Related Groups (DRGs) is limited, and it does not affect variations in admissions and capital costs. Population-based methodologies can be used in adjusting DRG rates to control both problems. In addition, the DRG system only applies to Medicare payments; the Norwegian experience demonstrates that this system may result in significant shifting of costs onto other payors.
This study examines how hospitals respond to the reimbursement and monitoring methods used under the Medicare Prospective Payment System. Under the reimbursement system, hospitals can follow several strategies to increase profit. The strategies examined here are: 1) providing inaccurate reports of diagnoses, and 2) unnecessarily admitting patients. Empirical evidence supports the contention that hospitals follow these strategies and that the extent to which they do differs across diagnoses. The results have implications for the form of monitoring done under the Prospective Payment System.
As the uneasily awaited Medicare outpatient prospective payment system becomes reality July 1, hospital emergency department and outpatient clinics face an even greater need for accurate coding models and systems, as well as vigorous cost-reduction strategies. By the nature of the services they provide, such facilities will find securing adequate payment for appropriate, quality care to be a complex and challenging task. Those organizations that have prepared effectively, however, may benefit under the prospective payment system.
A principal concern regarding Medicare's diagnosis-related group (DRG)-based prospective payment system is whether hospitals caring for more severely ill patients may be undercompensated for the services they provide. Research on possible inequities in hospital payment has been hampered by the absence of an objective, easily obtained, and valid measure of patients' severity of illness. Because laboratory data are objective and computerized in most of our nation's hospitals, a system utilizing such data, if shown to discriminate between patients of differing expected resource use, could prove most helpful in examining possible inequities in prospective payment system hospital payment. At a major teaching hospital, data were used from length of stay inlier patients in the 10 most frequent medical DRGs in the U.S. to develop and evaluate a severity of illness system called APACHE-L. APACHE-L uses the laboratory component of the original APACHE score. Whereas DRGs explained 20% of the variation in length of stay for the top ten DRGs, APACHE-L explained up to an additional 14% of the variation. For ancillary resource use, DRGs explained 10% of the variance, and APACHE-L explained up to an additional 15%. Diagnosis-related group-specific analyses demonstrated that the amount of resource use variance explained by APACHE-L varied widely depending on the DRG (from R2 = .00 for DRG 410, chemotherapy; to R2 = .38 for DRG 320, kidney and urinary tract infections, age greater than 17 years with complications or comorbidities). The APACHE-L score, which is objective and readily available in our nation's hospitals, shows considerable promise as a severity of illness adjuster for a subset of DRGs.
Since January 1980, the hospitals in the Rochester, NY, area have been operating under a community-wide revenue cap. This prospective payment system features local administration and control and is the first time a group of hospitals have committed themselves to a comprehensive regional financing system. This system differs from other prospective payment programs in that it covers both inpatient and outpatient care and offers incentives for ambulatory treatment whenever clinically appropriate. In the first five years of this program, the increase in Rochester area hospital expenses was 46%, compared with 52% for New York State hospitals and 68% for US hospitals at large. Further, the financial position of the Rochester hospitals improved, showing an operating margin of 2.6%, compared with a figure of-15.8% for New York State hospitals at large. A community-wide assessment showed no evidence of a reduction in the quality of or access to care. This community system for hospital payment and planning merits serious consideration for areas wishing to realize high-quality care at an affordable cost through a balanced combination of self-regulation, cooperation, and competition.
The diagnosis procedure combination (DPC) of Japan started in April 2003. It is a unique "per day" payment system that evolved from diagnosis-related group and prospective payment system, which was a "per case" system. After a trial of two years, various undesirable problems of DPC have been revealed. A review of those problems in major diagnostic classifications (16) is in progress. The main problems are: 1) the medical institution-specific coefficient; 2) up-coding; and 3) consideration for expensive medical equipment such as during cardiac catheterization. The inclusive payment system is described and the problems of DPC are discussed.
The confrontation of the macro- and micro-economic approaches of hospital costs is a recurrent question, in particular for pathologies where length of stay is highly variable, like acute myeloid leukemias (AML). This monocentric and retrospective study compares direct hospital medical costs of induction and relapse treatment sequences for AML, valued according to four different approaches: the analytic accounting system of our hospital, the French Diagnosis Related Group (DRG) cost databases of hospital discharges (readjusted, or not, to actual hospital stay duration), and official tariffs from the new French DRG prospective payment system. The average cost of hospital AML care valued by the analytic accounting system of our hospital is 61,248 euros for the induction phase and 91,702 euros for the relapse phase. All other national valuation methods result in a two- to four-fold underestimation of these costs. Even though AMLs are now individualized in the 10th version of the French diagnosis related group (DRG) classification, the impact of this issue in other pathologies is going to increase with the gradual implementation of the French DRG prospective payment system. That is why it must be assessed before the progressive extension of this financing system.
Hospitals, insurance companies, and federal and state governments are increasingly concerned about reducing patient cost expenditures while maintaining high quality patient care. One method of reducing expenditures has been to tie hospital reimbursement with a prospective payment system based on diagnosis-related groups (DRGs). However, reimbursement under the DRG system is not acceptable for all patients in all hospitals because it is neither an accurate predictor of costs nor of clinical outcome. This deficiency poses significant problems for hospitals because DRGs are used nationwide as the prospective payment system for inpatients covered by Medicare. Several case-mix adjusters have been proposed to modify DRGs to improve their accuracy in predicting costs and outcome. We reviewed five of the most widely available indices: Acute Physiologic and Chronic Health Evaluation (APACHE II), Coded Disease Staging, Computerized Severity Index (CSI), Medical Illness Severity Group System (MEDISGROUPS), and Patient Management Categories (PMC). Recommendations for the use of a single case-mix adjuster cannot be made at this time because all indices have not been compared in sufficiently diverse settings and because some are better predictors of costs while others are better predictors of clinical outcome. Hospital epidemiologists and other infection control practitioners should be informed about these indices and their potential applications as they expand their role beyond infection control problems to issues concerning cost containment, quality assurance, and reimbursement.
In order to "chain" all the information concerning their patients' files, hospitals have set up their own identification system. This system is not easy to manage and can encounter several difficulties. When entering the hospital, each patient is given an identification number resulting mainly from his ID card, his Health Care card data and other data... The clerk who registers a patient seeks for possible prior hospital stays of this patient: should the patient be unknown, a new record of identification will be created; but should this patient be already registered, the clerk will link the patient's new hospital stay to the already existing file and update the permanent patient's identification data if necessary. In spite of all the care taken to carry out this process, some errors may occur: creation of "doubles", which means creating a new patient's file for an already existing patient, or conversely wrong chaining for an already existing patient. In order to track down these kinds of errors hospitals have set up a quality system. Moreover, since January 2001, in the frame of the Prospective Payment System (in French PMSI), a hospital stay chaining system based on a calculated key (H coding) has been designed. If the use of this key is meant to provide statistics concerning patients' cares and not patients' stays it may also become part of the quality policy of an establishment concerning patients' permanent identification data. Considering the 61 486 hospital stays at the C.H.U of Nancy for the first six months in 2001, it has been possible to compare the results in term of a patient population calculated from the permanent identification system of the hospital with the results obtained by the PMSI chaining system. No important differences have been detected and the results are very close. Besides, in order to track down possible doubles in the C.H.U patient identification system, chaining differences have been analysed. For the 22 detected cases, no identification management anomalies can be found; the doubles are the result of the calculating system of the chaining key used by the PMSI. A single interesting case can be mentioned: it concerns an anonymous registration stay; despite a previous stay in the hospital, the patient was given another identification number to ensure her complete confidentiality.