Hospital Prospective Payment and the Quality of Care

Even before the advent of the Medicare prospective payment system (PPS) on October 1, 1983, concern was expressed that this new payment method would affect adversely the quality of hospital care given to Medicare beneficiaries. The use of diagnosis-related groups as the basis for payment would, it was argued, encourage hospitals to reduce the lengths of inpatient stay excessively and to provide inadequate service.The period immediately following the inception of PPS was filled with reports of patients being discharged from hospitals "quicker and sicker" and with anecdotes describing particularly egregious cases. Congressional hearings and governmental investigations followed, along with . . .