Unrecognized redistributions of revenue in diagnosis-related group-based prospective payment systems.
Kominski, Gerald F
Date of Pub
Mays, Randall B; Pickens, Gary T; Williams, Sankey V
The Medicare prospective payment system, which is based on the diagnosis-related group patient-classification system, identifies
previously unrecognized redistributions of revenue among diagnosis-related groups and hospitals. The redistributions are caused
by two artifacts. One artifact results from the use of labor market indexes to adjust costs for the different prices paid
by hospitals in different labor markets. The other artifact results from the use of averages that are based on the number
of hospitals, not the number of patients, to calculate payment rates from average costs. The effects of these artifacts in
a sample data set have been measured, and it was concluded that they lead to discrepancies between costs and payments that
may affect hospital incentives--the overall payment for each diagnosis-related group--and Medicare's total payment.
Costs and Cost Analysis : Diagnosis-Related Groups : Financial Management : Financial Management, Hospital : Salaries and
Fringe Benefits : New Jersey : Rate Setting and Review/methods : Support, U.S. Gov't, P.H.S. : United States