Biomedical subjects
Publications and source records attributed to M J Kalison.
This article addresses the introduction of competition into the Medicare prospective payment system (PPS), the application of aa expanded PPS to ensure that Medicare is not paying more than the market price for comparable services, the expansion of the Medicare PPS to outpatient services, and the expansion of the Medicare PPS to physician fees for inpatient care.
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Because of recent, fundamental changes in the incentives to provide health care, the healthcare industry is finding its basic structure changing too. Therefore, to be able to think and plan strategically, it is important to look ahead and attempt to predict what some of these changes to the industry will be and how they will affect it in the future.
PPS in its current form has achieved significant cost savings in three years. But to further reduce the costs of the Medicare program, competitive market forces should be introduced.
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PPS is in the midst of a phase-in period where DRG rates are based on a combination of national and regional rates and hospital-specific actual costs. At the end of this period, the regional rates and the hospital-specific payments will be replaced by one national DRG rate. Is this method the best solution for PPS? One national rate does not reflect uncontrollable cost variations due to regional factors and the variability of DRGs. Instead, Medicare hospital payments should be based on a combination of regional and national rates. And, using a coefficient of variation to determine the hospital payment derived from the national rate, a DRG rate can be phased in that recognizes regional and DRG variability.
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As they are now, defined, the DRGs form a manageable, clinically coherent set of patient classes that relate a hospital's case mix to the resource demands and associated costs experienced by the hospital. DRGs are defined based on the principal diagnosis, secondary diagnoses, surgical procedures, age and discharge status of the patients treated. Through DRGs, hospitals can gain an understanding of the patients being treated, the costs incurred and within reasonable limits, the services expected to be required. The classification of patients into DRGs is a constantly evolving process. As coding schemes change, as more comprehensive data is collected or as medical technology or practice changes, the DRG definitions will need to be reviewed and revised.
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Health care costs must be controlled to finance the expanded eligibility and coverage promised during the Presidential campaign. As a practical reality, reforming the existing fee-for-service system is the only way that significant cost control can be achieved during the next four years. The expansion of the basic Medicare prospective payment system to all health care settings and to all payers, combined with price discounting and consumer incentives to use providers that discount, can form the basis of a competitive prospective payment system (PPS). A competitive PPS can bring down costs and complement managed competition and other ongoing cost-containment initiatives.
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