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Medicare's prospective payment system: A critical appraisal.

Coulam RF, Gaumer GL - Health Care Financ Rev (1992)

Bottom Line: This literature suggests that most of the intended effects of PPS on costs and intensity of care have been realized.The literature offers some hope that the worst fears about the effects of PPS on quality of care and the health of the hospital industry have not materialized.But because of data lags, the studies done to date seem to tell us more about the effects of the early, more generous period of PPS than about the opportunity costs of reducing hospital cost inflation.

View Article: PubMed Central - PubMed

ABSTRACT
Implementation of the Medicare prospective payment system (PPS) for hospital payment has produced major changes in the hospital industry and in the way hospital services are used by physicians and their patients. The substantial published literature that examines these changes is reviewed in this article. This literature suggests that most of the intended effects of PPS on costs and intensity of care have been realized. But the literature fails to answer fundamental questions about the effectiveness and equity of administered pricing as a policy tool for cost containment. The literature offers some hope that the worst fears about the effects of PPS on quality of care and the health of the hospital industry have not materialized. But because of data lags, the studies done to date seem to tell us more about the effects of the early, more generous period of PPS than about the opportunity costs of reducing hospital cost inflation.

No MeSH data available.


Trends in Medicare inpatient revenue, cost per case, and revenue per case: 1983-88
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Related In: Results  -  Collection


getmorefigures.php?uid=PMC4195137&req=5

f1-hcfr-91-supp-045: Trends in Medicare inpatient revenue, cost per case, and revenue per case: 1983-88

Mentions: The bifurcation of PPS margins may be a telling fact about the cost-containment success of PPS. As Coelen's (1991) graphic analysis indicates (Figure 1), the hospitals entering PPS with the highest base-year costs per case reduced costs more than the lowest cost hospitals and experienced virtually no increase in PPS revenues per case through the phase-in period. (Coelen uses a threshold of 20 percentage points above the mean to define the high-cost group; the low-cost group has a threshold 20 percentage points below the mean.) The more rigorous econometric work on the early years of PPS by other researchers from the Urban Institute and Georgetown first pointed to the fact that hospitals pressured by payment rates under PPS (i.e., high-cost hospitals) exhibited more aggressive responses to improve financial performance, in terms of cutting LOS, reducing rates of inflation in expenditures, and avoiding larger reductions in admission volumes (Feder, Hadley, and Zuckerman, 1987; Hadley and Swartz, 1989; Hadley, Zuckerman, and Feder, 1989). Examining the first 2 years of PPS, these researchers also found that these differences in response, coupled with the regional rate blend, led to significant differences in margin trends between pressured and not-pressured hospitals. Changes in profit margins were favoring the latter group of facilities, which were taking less aggressive action to improve financial performance. This pattern of evidence suggests that pressure drives discretionary behavior, but profits accrue as windfalls on past cost levels, or to other facility and market characteristics. The pattern has been widely confirmed in every study that has examined differential hospital performance resulting from differential pressure.8 Across these various pressure indicators and studies using varied data sets,9 there is a consistent pattern of findings.


Medicare's prospective payment system: A critical appraisal.

Coulam RF, Gaumer GL - Health Care Financ Rev (1992)

Trends in Medicare inpatient revenue, cost per case, and revenue per case: 1983-88
© Copyright Policy
Related In: Results  -  Collection

Show All Figures
getmorefigures.php?uid=PMC4195137&req=5

f1-hcfr-91-supp-045: Trends in Medicare inpatient revenue, cost per case, and revenue per case: 1983-88
Mentions: The bifurcation of PPS margins may be a telling fact about the cost-containment success of PPS. As Coelen's (1991) graphic analysis indicates (Figure 1), the hospitals entering PPS with the highest base-year costs per case reduced costs more than the lowest cost hospitals and experienced virtually no increase in PPS revenues per case through the phase-in period. (Coelen uses a threshold of 20 percentage points above the mean to define the high-cost group; the low-cost group has a threshold 20 percentage points below the mean.) The more rigorous econometric work on the early years of PPS by other researchers from the Urban Institute and Georgetown first pointed to the fact that hospitals pressured by payment rates under PPS (i.e., high-cost hospitals) exhibited more aggressive responses to improve financial performance, in terms of cutting LOS, reducing rates of inflation in expenditures, and avoiding larger reductions in admission volumes (Feder, Hadley, and Zuckerman, 1987; Hadley and Swartz, 1989; Hadley, Zuckerman, and Feder, 1989). Examining the first 2 years of PPS, these researchers also found that these differences in response, coupled with the regional rate blend, led to significant differences in margin trends between pressured and not-pressured hospitals. Changes in profit margins were favoring the latter group of facilities, which were taking less aggressive action to improve financial performance. This pattern of evidence suggests that pressure drives discretionary behavior, but profits accrue as windfalls on past cost levels, or to other facility and market characteristics. The pattern has been widely confirmed in every study that has examined differential hospital performance resulting from differential pressure.8 Across these various pressure indicators and studies using varied data sets,9 there is a consistent pattern of findings.

Bottom Line: This literature suggests that most of the intended effects of PPS on costs and intensity of care have been realized.The literature offers some hope that the worst fears about the effects of PPS on quality of care and the health of the hospital industry have not materialized.But because of data lags, the studies done to date seem to tell us more about the effects of the early, more generous period of PPS than about the opportunity costs of reducing hospital cost inflation.

View Article: PubMed Central - PubMed

ABSTRACT
Implementation of the Medicare prospective payment system (PPS) for hospital payment has produced major changes in the hospital industry and in the way hospital services are used by physicians and their patients. The substantial published literature that examines these changes is reviewed in this article. This literature suggests that most of the intended effects of PPS on costs and intensity of care have been realized. But the literature fails to answer fundamental questions about the effectiveness and equity of administered pricing as a policy tool for cost containment. The literature offers some hope that the worst fears about the effects of PPS on quality of care and the health of the hospital industry have not materialized. But because of data lags, the studies done to date seem to tell us more about the effects of the early, more generous period of PPS than about the opportunity costs of reducing hospital cost inflation.

No MeSH data available.