The Prospective Payment System and Quality

This issue ofThe Journalis devoted to a remarkable series of reports from a major investigative group based on a study designed to examine the clinical effects of the Medicare Prospective Payment System, (PPS) which was based on diagnosis related groups (DRGs).¹⁻⁸At inception, the major clinical concern about the PPS was that patients might have poorer outcomes due to cost-cutting incentives that went beyond eliminating unnecessary or marginally beneficial care to actually restricting needed care. Specific concerns centered on decreases in length of stay that might lead to increased nursing home admissions, more permanent nursing home placements, increased hospital readmissions, or higher mortality rates. Some readers may review these articles with the implicit belief that the findings are directly attributable to the DRG system. However, no such single-cause judgment is warranted given other major changes occurring in the hospital regulatory environment and the marketplace. For instance, there