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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

Case 3. Medicare Reimbursement Reforms (Page 1 of 37)

Case Description

Since the 1980s, Medicare hospital reimbursement has changed from a fee for service arrangement to a prospective payment system (PPS) in which hospitals are paid based on the patient's diagnosis related group (DRG).

For example, if your Dad has pneumonia with some complications or coexisting conditions and is admitted to Good Care Hospital, Good Care might receive $19,518 for his care. If Dad needs more services than Medicare will pay for that diagnosis group, the hospital can choose to cover those costs out of their pockets or withhold the treatment.

If Dad uses less money than the hospital receives, then Good Care keeps the money. This situation has led to earlier discharges from the hospital.

In 1984, your Dad would have stayed in the hospital for 9.4 days compared to 7.9 days in 1993 (HCFA, 1995). When hospitals reduce the length of stay (LOS), they can reduce their expenses. How will this affect his health and your ability to provide care for him?

In addition to your concerns about your father, you will likely have many other questions - especially if you are answering those for a researcher about to start a study on the topic.

This case raises many questions. You might want to ask about PPS, cost effectiveness of DRGs and what effect reducing the length of stay has had on quality of care and quality of life - and find answer to those questions.

The following Case background, objectives and exercise will help you think about the project.

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