aug 20, 1983 - Begin DRG System

Description:

diagnosis-related groups replace fee-for-service. also medical-severity adjusted diagnostic related groups system (MS-DRG)

encourages hospitals to be more efficient and bear the financial risk for slow delivery of care or mistakes. but might promote stinting on care. is cost-based NOT value-based. add-ons encourage certain "desirable" characteristics. and complicated system allows for gaming of the system

1. determine a "base case" and incorporate operating expenses (adjust labor per regional variation in wages) and capital expenses
2. adjust base case by 746 different weightings that reflect patients' clinical condition and treatment strategies
3. add-ons
4. outlier payment if patient stays unusually long because of complication or other reason

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