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National Information Center on Health Services Research and Health Care Technology (NICHSR)

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Introduction to Health Services Research : A Self-Study Course

Module 2: Brief History of Health Services Research (Page 25 of 40)

1980s: Prospective Payment System and Ethical Issues

In the 1980s, under the Reagan Administration, attention continued to focus on controlling costs, especially costs associated with Medicare program.

Snapshot of a section of the CMS Medicare Payment Systems and Coding Files. This image will open a new window. Close window to return to this page. In October 1983, the government instituted the Prospective Payment System (PPS) for Medicare patients who were hospitalized. The system was intended to change hospital behavior through financial incentives that encourage more cost-efficient management of medical care.

Diagnosis Related Groups (DRGs)

This System reimbursed hospitals for the cost of care using predetermined diagnosis related groups (DRGs), which set the costs for a particular diagnosis - not for the actual services rendered.

Cost Shifting and DRG Creep

Hospitals responded creatively with cost shifting (increased charges for the privately insured patients), DRG creep (exaggerating the intensity of the diagnosis in order to receive higher levels of reimbursement), and earlier discharges.

Ambulatory Care Explodes

At the same time, ambulatory medical and surgical procedures replaced many in-hospital services, forcing hospitals into new ventures and partnerships in order to survive.

Growth of For-profit Hospital Chains

Corporate, for-profit hospital chains developed and spread. These changes financially squeezed the non-profit hospitals. Patients admitted to hospitals were often sicker.

Many health services researchers criticized the cost control efforts of the 1980s as shifting costs rather than reducing them (Altman, 1993).

Joint Commission (Rebranded from the Joint Commission on Accreditation of Healthcare Organizations)

The former Joint Commission on Accreditation of Hospitals (JCAH), created in 1951, changed its name to Joint Commission on Accreditation of Healthcare Organizations (JCAHO) in 1988 to better reflect its purpose and expanded scope of activities. In 2006 it developed a new Web site and rebranded itself as the "Joint Commission."

"The mission of The Joint Commission is to continuously improve the safety and quality of care provided to the public through the provision of health care accreditation and related services that support performance improvement in health care organizations."

The first Standards for Hospital Accreditation were published in 1953. Several Accreditation Councils developed standards and survey accreditation procedures over the years. These now incorporate performance improvement concepts to achieve optimal achievable levels of quality in accredited healthcare organizations.

See additional information on the Joint Commission in Module 3.

Ethical Issues

On an ideological front, the ethics of extending treatment and life support to the elderly and severely ill received much attention. While many people approved of a patient's right to refuse treatment and relieve suffering, others warned that such policies were motivated more by cost control needs than concerns for patient autonomy.

Several social commentators described a shift from an egalitarian perspective of the 1960s and 1970s to one of cutbacks to control costs (Woolhandler, 1989).

View Key Projects and Milestones in Health Services Research.

Discussion Questions

  1. From your knowledge of the Prospective Payment System, comment on whether PPS has reduced health care costs. What was the response to PPS by hospitals, ambulatory care centers and other health care settings?
  2. Ethical issues, if anything, are growing more complex as time goes on and as treatments expand through gene therapy. Given the recent events in removing life support from a patient, discuss the complex issues surrounding the issue of gene therapy to create new treatments? Why should librarians pay close attention to discussions among ethicists about end of life and treatment issues?
  3. This statement was made in the Ethical Issues section above, "While many people approved of a patient's right to refuse treatment and relieve suffering, others warned that such policies were motivated more by cost control needs than concerns for patient autonomy." Discuss what you think of the warning. Was it necessary? What is driving patients' rights in the early part of the 21st century? Describe.
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