U.S. National Library of Medicine

Introduction to Health Services Research : A Self-Study Course

Case Description | Case Background | Case Objectives | Case Exercise

Case 3. Medicare Reimbursement Reforms (Page 10 of 37)

Phase One: Thinking About the Issues

Q2c. How does this regulation, the prospective payment system (DRGs), affect different stakeholders: Hospitals and health care providers?

Suggested Solution

Hospitals and health care providers respond quickly to changes in the environment. Some of the changes include:

• Hospitals have incentives to lower their costs or increase their income by
  • providing fewer services
  • increasing the number of patients treated
  • increasing the number of admissions per patient
  • charging more for outpatient procedures and increasing the number of outpatient admissions
  • charging non-Medicare patients more - cost shifting
  • recording a more severe diagnosis in the medical record - DRG creep
• some hospitals may be forced to close due to low reimbursement rates

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