Good quality care increases hospital profits under prospective payment.
This study shows that, contrary to popular belief, the prospective payment system discourages skimping on medically indicated care. The quality of care on a nationally representative sample of Medicare discharges underwent judgmental review using implicit criteria. The reviewing physicians identified hospitalizations that omitted medically indicated services and diagnoses overlooked because of this skimping. After deduction for the cost of the omitted services and probability of negative diagnostic tests, good quality care would have increased hospital profits a significant 7.9 percent. As the specificity of diagnosis and intensity of treatment increase, the DRG payment rises faster than the cost of providing medically indicated services.
Hsia
D C
DC
United States Department of Health and Human Services, Baltimore, MD 21207.
Ahern
C A
CA
D003625:Data Collection; D003953:Diagnosis-Related Groups / Q000191:economics / Q000706:statistics & numerical data; D004469:Economics, Hospital / Q000706:statistics & numerical data / Q000639:trends*; D005069:Evaluation Studies as Topic; D006302:Health Services Research; D006801:Humans; D007182:Income / Q000706:statistics & numerical data*; D010351:Patient Discharge / Q000706:statistics & numerical data; D011445:Prospective Payment System / Q000191:economics*; D011787:Quality of Health Care / Q000191:economics* / Q000592:standards; D014481:United States