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Ethical perspectives on prospective payment.

Ethical Perspectives on Prospective Payment

Dramatically rising prices in the Medicare program led Congress in 1983 to pass legislation that changed the method of reimbursement for Medicare hospital charges from a cost-based retrospective system to a prospective payment system (PPS). Medicare's PPS now pays hospitals a preset price for services to its beneficiaries based on average costs of hospital care for patients in diagnosis-related groups (DRGs).

"Outliers" provide a mechanism for enhanced payments for exceptioanlly costly cases and for those whose care requires more days in the hospital. But there are restrictive caps on the number of outliers that a hospital can claim and the amount that will be added to the normal DRG payment for patients who qualify. Other adjustments have been built into the DRGs related to case mix, wages, teaching, disproportionate share of indigent patients and status as sole provider in a community. The main thrust, however, is to define a single payment schedule in advance of treatment. The Medicare PPS approach shifts the financial risk of treating Medicare patients to hospitals and gives them an incentive to provide care more efficiently.

At the same time, Congress also mandated that all hospitals seeking Medicare reimbursement contract with a peer review organization (PRO). PROs are responsible for assuring that care provided to Medicare beneficiaries is medically necessary, consistent with professional standards, and provided efficiently and economically. They monitor Medicare admissions to hospitals, review DRG designations, and review outlier cases. PROs help to enforce Medicare's DRG system and to achieve the congressional intent of containing program costs.

Some Difficulties

The introduction of PPS has effected important changes in the provision of health care whose ethical implications are worthy of examination. But significant changes are occurring rapidly throughout American health care. Health care costs, though moderating, are still increasing beyond the general rates of inflation. Competitive pressures and marketing have increased dramatically. Medical services have been "unbundled" and the typical locus of care has shifted away from hospitals and doctors' offices to nursing homes, shopping malls, and patients' homes.

The number of physicians is rising and solo practice has given way to health maintenance organizations, preferred provider schemes, and other new clinical and financial arrangements. The nursing profession is under new pressures. Corporations have become keenly interested in containing health care costs. And more and more Americans are without health insurance protection--some 35 to 37 million. Given this backdrop of large-scale systemic change, it is very difficult to isolate the effects of Medicare's new measures.

We also lack reliable data on many of the issues raised by Medicare's PPS. One of the most important issues, for example, is the impact of DRGs on the general quality of care. But there is no routine systemic collection and analysis of the data--on mortality, morbidity, and consumer satisfaction--needed to make a secure evaluation.(1)

Some modesty about ethical assessment of so large a social reality is also appropriate. Any appraisal of the goodness or badness of DRGs is open to the challenge: "Good or bad compared to what--bankruptcy of the Medicare program, more taxation, further privatization, socialized medicine?"

Such a definitive comparative evaluation of DRGs cannot be attempted here. Nevertheless, an ethical evaluation of the changes wrought by the Medicare PPS is important and timely. "For Medicare is," in the words of a recent statement by the American Association of Retired Persons, "the flagship of the American health care system--where it leads others follow."(2) Concerns about the impact of DRGs on the operation of the flagship will be offered from two ethical perspectives: utilitarian and contractarian.

General Trends

Some general trends associated with Medicare's PPS are apparent. First, hospital admissions have declined overall. They dropped 4 percent in 1984, 4.6 percent in 1985, 2.1 percent in 1986, and 0.6 percent in 1987.(3) The average length of stay (LOS) in hospitals has fallen too. In 1983, the average LOS was 9.9 days; in 1984 it fell to 9.1, the biggest drop in Medicare's history, and by 1985 it reached 8.7 days.(4) Decline in LOS may have reached its limit since it increased in 1986 by 0.7 percent and in 1987 by 0.8 percent.(5)

As a result of fewer admissions and shorter LOS, hospital occupancy has fallen. In 1983, general acute care hospitals were 72.2 percent full; by 1985, only 63.6 percent.(6) This decline would have been more dramatic had hospitals not closed 49,000 beds since 1983.(7)

Most hospitals--81 percent--have profitted from PPS, with Medicare surpluses averaging between 14 and 16 percent.(8) The perception of unfair profit-taking by hospitals has had its inevitable political effect in a gradual tightening of the federal reimbursement schedule, culminating in a congressional freeze on PPS rates in 1987. From 1973 to 1984, hospitals' operating margins increased annually, moving from 1 percent to over 6 percent. DRGs have reversed this trend: operating margins have declined each year since 1984, reaching 4.5 percent in 1987.(9)

Has PPS saved money? Controlling for inflation, growth of inpatient Medicare spending per patient has slowed since 1983, but is still increasing. Partly because the hospital population became more intensively ill, payment per hospital discharge rose 12 percent from 1984 to 1985.(10) Medicare costs per hospital day have been rising as well--$400 per day in 1985 to $492 in 1986 to a projected $572 in 1987. In spite of all the cost-containment efforts of the last decade, hospital costs per capita are still increasing at the 1978 rate.(11) Payments for outpatient care have increased appreciably. In 1985, for example, Medicare inpatient expenses increased by 6.8 percent, but outpatient costs went up by 25 percent.(12)

Impact on Patients

There are widespread concerns that PPS has had a negative impact on patients. These concerns can be focused around four issues: admission to hospitals when care is needed, care for the sickest of patients, the quality of care during the hospital stay, and the appropriateness of discharge from the hospital.

A new barrier to hospital admission is the need for Medicare beneficiaries to receive PRO preadmission certification, without which reimbursement to the admitting hospital may not be forthcoming. In effect, if the local PRO will not certify the need for hospitalization for a given patient, that patient will not be admitted.

Patients trying to enter certain hospitals with certain diagnoses may encounter special difficulties. In Florida, the 1984-86 PRO contract called for reducing unnecessary admissions by specific hospitals for specific DRGs. The 1986-88 contract was more focused--calling for review of fifteen providers to reduce unnecessary admissions and for review of admissions under ten selected DRGs for all Florida hospitals. And readmission of a patient to the same hospital for the same diagnosis may constitute grounds for PRO denial of reimbursement.(13)

DRG financial incentives create another barrier for those who are especially sick, as these patients represent potential losses for hospitals. Very sick patients become outliers, which may account for most hospital losses under PPS--more than half of all hospital losses have occurred in 2.8 percent of cases.(14) Clearly, hospitals have an incentive to avoid admission of the very sick or to transfer them to other providers when possible. This may entail a prejudice against the elderly, since there is evidence that those 75 to 80 years of age cost more to treat.(15)

Special concern for the plight of very ill patients centers on the DRG system's lack of a severity of illness index. Hospital patients are more ill now in general after PPS because of preadmission scrutiny and shortened LOS.(16) But some patients will always be more intensively ill than others with the same diagnosis while DRG reimbursement will be the same for all. Moreover, intensively ill patients are not evenly distributed across all hospitals.(17) Overall, the lack of a severity of illness measure may have created a perverse social incentive: the desire on the part of hospitals to avoid the patients who need their services the most.

Whether the overall quality of hospital care for inpatients has declined due to PPS is a matter of dispute, attributable in part to the fact that the U.S. lacks a quality of care monitoring system.(18) But there is no lack of anecdotal evidence that the DRGs have created a more rushed, less personal hospital experience.

Discharge from hospitals has raised two controversies. Since a hospital's costs increase with LOS, it is in a hospital's interest to discharge patients as soon as possible. When the quality of care is compromised by early release, discharge must be considered premature. In 1986, the U.S. Senate Special Committee on Aging issued a report charging that DRGs were driving patients out of hospitals "quicker and sicker," that patients and families were receiving false and incomplete information about patient rights under the new system, and that doctors were being pressured against their best professional judgments to discharge patients earlier.(19) HCFA now mandates that every Medicare hospital patient be given a written statement of their rights and information about the procedure to appeal a discharge decision thought to be premature.(20)

The second controversy concerns the care of patients after discharge. Patients are now entering skilled nursing homes, mental and rehabilitation hospitals (both exempted from DRGs), and outpatient and long-term care facilities with more serious conditions than ever before.(21) Home health care is also expanding rapidly and is creating new pressures on family members to help render care previously provided in hospitals.(22)

Because of these changes, many patients are finding it difficult to locate and finance appropriate aftercare. When Medicare patients find it impossible to locate or pay for the care they need after hospital discharge--when they are thrust into a "no-care zone"(23)--quality of care is compromised and health is jeopardized.

Quality of Care, Equity of Care

From a utilitarian point of view, there are several reasons to be very concerned about the impact of DRGs on hospital patients. First, incentives to restrict admission to hospitals may result in some persons being denied needed hospital care, thus producing avoidable suffering and premature deaths. The lack of a severity of illness index combined with an inequitable distribution of the most ill patients creates an incentive to avoid the very patients who most need hospital care. But in terms of the utility of avoiding suffering and death, health care resources are best spent on those who are most ill; or at least on those who are most ill and can still draw significant benefits from health care.

The pressures that DRGs have brought to shorten LOS, to under-utilize services, and to rush and depersonalize hospital care also raise substantive ethical questions. Plainly, if persons die or suffer health reversals because of premature discharge and inadequate aftercare, significant negative consequences have been produced. Moreover, the increased cost of outpatient and alternative site care and the stresses on family caregivers must be weighed against the benefits of shortened hospital LOS.

The standard of justice from the contractarian perspective is determined by the conditions of social choice behind a "veil of ignorance." Stripped of personal bias, contractors would have to appraise social arrangements from the point of view of the least well-off.(24) Ideal contractors would know that many people depend on hospital care, but not how much they themselves or their families would rely on it. They would know that some people are exceptionally ill and costly to care for, but would not know if they were among this needy group. They would know that the quality of hospital care can make a difference medically and that certain ways of structuring hospital care have consequences for persons' self-respect.

Given these assumptions, ideal contractors would likely insist on universal access to appropriate hospital care when it is needed. They would want the most ill to have the readiest access to care, discharge to be appropriate, and aftercare needs met for all.

Contractors would be concerned about any negative impact on patient self-respect. DRGs clearly provide incentives to depersonalize the hospital experience--to treat the disease, not the person. They heighten the economic dimension of important treatment and leave less room for the human dimensions of care.

Harried Hospitals

PPS has exacerbated the competitive relationships among hospitals. At the outset of PPS, historic costs at each hospital played a role in determining its DRG reimbursement schedule. Now, with certain adjustments, rates are national. All hospitals receive the same reimbursement for the same diagnosed illness regardless of their historic costs.

National DRG rates mean that hospitals are no longer competing against their own past performances. They are now competing against each other. The hospital that can do its appendectomies more cheaply profits from PPS on that procedure. It can then use that profit to enhance its general competitive relationship to surrounding hospitals by subsidizing a losing service area, increasing its advertising budget, or providing better facilities for the medical staff. A hospital that loses on its appendectomies may see that loss magnified by the increased impact of a competing hospital's marketing strategy.(25)

A hospital that is losing in the competition to survive has several options. It can begin to close DRG unprofitable services.(26) Higher-profit services can be promoted while "loss-leader" community service programs are eliminated or deemphasized.(27) Inpatient economies can be sought; by limiting psychosocial services, for example, when they cannot be shown to be linked to shortened LOS.(28) Some hospitals may increase their involvement in the exploding area of outpatient services.(29) PPS financial pressures encourage a movement already afoot in our medical culture: a change in the nature of the hospital from an eleemosynary community service institution to a business.(30) And some of these hospital businesses will fail.

Hospital competition might produce good consequences if it tended, as competition does in some contexts, to lower prices and expand consumer options. But the ordinary pressures of competition do not seem to apply to hospitals. The heightened existential character of the need for hospital services, the relative inability of patients to be critical consumers of hospital services, the general difficulty of appraising quality in health care, the prevalence of third-party payment, and the unusual combination of capital-intensive technology with labor-intensive professional care all conspire to make hospitals exceptional cases economically.

There are reasons to be skeptical about the utility of DRG-driven competition in the hospital environment. Without a severity of illness adjustment, specialty care centers, university hospitals and other intensive care institutions, and inner city hospitals may be faced with the choice of closing or beginning to refuse the most ill patients.(31) Evidence has begun to emerge of difficulties in financing medical education and clinical research, and this may mean hard times ahead for university hospitals.(32) And there may still be a considerable underestimation of real costs in DRG reimbursement for rural hospitals.(33) The negative consequences of these hospitals failing would be substantial.

Moreover, the magnitude of shifts to outpatient services and home health care have raised concerns that estimates of PPS-induced savings are overstated. Many costs may not have disappeared, but merely changed their venue.(34) No costs are saved, for example, when patients are transferred from DRG-controlled acute care hospitals to DRG-exempt rehabilitation and psychiatric hospitals.(35)

Contractarians likewise have reasons to be concerned about the implications of DRGs for institutional providers. Increased competitiveness in a DRG reimbursement environment without a severity of illness index will likely encourage avoidance of the very ill. But these are the least well-off medically--just the persons whose needs should come first.

Contractors would also be concerned about the fairness of the system. For hospitals whose patients are far below or far above the average of cost of care in given diagnoses, the system will not be equitable. It will shift money to those institutions with healthier, more well-heeled patients and away from those serving the least well-off--sicker and poorer populations. This profit differential will magnify itself in the development of new profitable services and the marketing of others. Rich hospitals may get richer; poor hospitals poorer.

The position of those who lose their local hospital to increased competition in the DRG environment is surely worsened. If inner city and rural hospitals should close in large numbers, this would surely strike unbiased contractors as unfair.

Impact on Health Care


PPS has, of course, had an impact on the professionals who provide health care. Doctors deal with new pressures from PROs and from hospital administrators. Nurses serve hospital patients who are more intensively ill and expand their roles in such settings as home health care. Hospital pharmacists cope with new demands caused by shorter LOS.(36) Medical records practitioners face all the problems associated with operating a new coding system, and one with high financial stakes.

The central problem of DRGs from the provider's point of view follows from the standardization that the system imposes. PPS reimbursement is determined by DRG weight, the amount of hospital resources thought to be consumed by the typical patient with a given diagnosis. DRG weight is therefore an average. This scheme works for all, of course, only if all hospitals treat average patients in the long run. But geography, specializations, and the historic missions of some hospitals make their patients atypical and may make their DRG reimbursement inadequate. When this occurs, hospital pressure will be brought to bear on professionals to treat all patients for less than DRG allotments to provide a hedge against those who are especially expensive to treat.

A related problem is the assignment of the weights themselves. The DRG system is young and its empirical base is slender. Some fear that the weights are compressed--set too low--for the most resource-intensive categories of illness. If this is the case, or if it is so perceived, there will be a temptation to "correct" for the system's underestimation of costs by coding cases with more lucrative DRGs than they may in truth deserve. The Case-Mix Index (CMI), an indicator of overall severity of illness and resource consumption based on a measurement of assigned DRG weights has been increasing. This increase may be a sign of new pressures placed on doctors by hospitals, an indication of "DRG creep."

Doctors are subject to greater scrutiny by hospitals since PPS. A recent study indicated that in 63 percent of the 89 hospitals surveyed, the DRG system is used to monitor the profitability of individual physicians. Sanford Marcus, president of the Union of American Physicians and Dentists claims that, "Every doctor on every hospital staff has felt the hot breath of the administration on his neck."(37)

Although federal law requires attending physicians to attest to the diagnosis, the stresses of coding do not actually fall on doctors at the outset since they do not make initial DRG assignments. Doctors instead certify assignments made by medical record practitioners. Some doctors confess to knowing little about the details of PPS and simply sign off on any reasonable description by the medical records department. Some find the whole process of reducing a complex medical situation to a set of numbers ridiculous. Some know that the truth is being stretched by medical record practitioners, who are defining diagnoses with "casuistical hairsplitting."(38)

The large majority of medical record practitioners have not reported pressures to compromise their professional integrity. However, a 1986 study found that 9.3 percent of responding medical record practitioners felt pressures to code fraudulently--an increase of 18 percent over 1985 figures(39)--and more pressures were reported from medical records departments at larger hospitals.

But PPS has had another impact on doctors that many find disquieting. They have been forced to take on the role of cost-containers. From admission to discharge and through all the many choices to be made in between, doctors control their patients' access to hospital resources. This has the potential to cause serious conflict. For some, asking doctors to be more cost-conscious entails a major shift in traditional professional ethics. It is like asking them "to abandon their central commitment to their patients."(40) Doctors have, willynilly, become "custodians of the money of the people who pay Social Security taxes."(41) But they have no expertise in this area and are rarely in a position to know that money saved on one of their patients is money put to a better use elsewhere in the system.

These pressures may also inhibit doctor-patient communication. Instead of informing patients of options, procedures presumed to be the most cost-worthy may be routinely ordered. Or nothing at all may be offered when there are only expensive alternatives. The patient's doctor--under hospital pressure--will want to keep costs as low as possible, and preferably below the DRG level.(42)

This sort of pressure is frustrating many doctors. To some, the traditional first rule of medical ethics, primum non nocere (first do no harm) has been transmogrified into the new first rule of PPS medicine, primum non expendere (first do no spending).

Complicating the situation for doctors are some undetermined legal issues. At discharge, doctors must certify their patients' assigned DRG. This may place a doctor at risk of civil or criminal prosecution if there has been any intentional misrepresentation or falsification. PROs may also place doctors in a no-win legal situation. If a PRO refuses to approve a procedure for a patient, the doctor has two unhappy choices. Perform the procedure anyway and accept the hospital's discipline for ordering a nonreimbursed service; or choose not to do it, and risk a malpractice suit if there is a bad result.(43)

Pressured Professionals

The phenomenon of DRG creep suggests that health care professionals may be adjusting their best professional judgment of patients' diagnoses in favor of the best financial judgment. If so, this is an erosion of professional integrity that could result in a loss of patient trust in medical professionals. A generalized loss of trust could lead to additional bad consequences including greater reluctance to seek professional help, less openness about personal experiences relevant to a health issue, increased likelihood of patient refusals of medically necessary procedures and actions against medical advice, etc.

DRG pressures on doctors and nurses from hospital administrators threaten to alter the delicate balance of patient care and concern for efficiency and create a greater sense of conflict between the roles of patient advocate and conserver of resources. There are negative consequences here for professional and patient alike.

The contractarian perspective would have similar concerns. Falsifying or hedging on DRG coding represents an erosion of integrity for doctors, medical record professionals, and others involved in the practice. The larger significance of this erosion lies in its direct assault on the self-respect of the individuals involved.

DRG-promoted pressures on health care professionals to become cost-cutters is also worrisome. Because of their commitment to the least well-off, contractors would want a strong patient advocacy role for doctors and nurses. But DRG pressures to contain costs may conflict with that tradition and leave patients in a position that contractors might well regard as overly vulnerable and therefore unfair.

For contractarianism, a key element in self-respect is personal autonomy. Our present cultural consensus on the necessity of patient informed consent is the major victory for personal autonomy in twentieth century health care. But this victory was shaped in an atmosphere in which doing more was the usual imperative for which patient consent was sought. DRGs create the opposite imperative. The danger here is that doctors will feel less obligation to detail what is not being done than they previously felt to detail what might be done. Whatever shape informed consent finally takes in the age of DRG medicine, some of the autonomy that has been gained for patients in the last generation may well be lost.

Uncompensated Care

Problems in securing access to health care remain among the most intractable difficulties in American health care.(44) To some extent, it is unfair to indict Medicare's PPS for its impact on the uncompensated care problem since the program was not designed to address medical indigency.

Still, Medicare's PPS has worsened the problem of uncompensated care in two ways that cannot be ignored. It increases the difficulty of shifting hospital costs to finance uncompensated care and it decreases hospitals' willingness to shoulder this burden in a more competitive environment.

Prior to PPS, the general mechanism for financing uncompensated hospital care was cost-shifting. Essentially, paying customers and third-party payers were footing the bill for those who did not pay, the cost shift acting as a hidden tax. But since PPS determines reimbursement levels in advance, hospitals can no longer enhance their revenue from Medicare patients. Hospitals have to shift the costs of uncompensated care to a smaller population of payers or reduce the volume of free care they provide.

Obviously, a hospital is hurt financially when it gives its services away free in a competitive environment. But it may also be hurt if its clientele, though insured, is poorer than average. Although there is some disagreement on this point,(45) it seems reasonable to suppose that the poor cost more to treat in hospitals. Their general health status is worse and it is more difficult to arrange for their aftercare. Both factors can increase LOS.

The full impact of PPS on indigent health care is hard to determine. For obvious reasons, hospitals do not report the numbers of individuals to whom they have denied care. A recent study simulated possible effects of PPS on the margins of high volume providers of uncompensated care. Assuming that worsened operating margins would lead to more restrictive uncompensated care policies, the study indicated a small gain (about 0.7 percent) in the aggregate level of uncompensated care provided using certain optimistic assumptions. Even so, free care would diminish in large hospitals in central cities in the East North Central region--one of the areas of greatest need. On more pessimistic assumptions, uncompensated care would decline from 0.4 percent to 0.5 percent overall with about two-thirds of the decline focused in inner cities. A recent shift in PPS money from day outliers to cost outliers will have a very negative impact on high volume providers of indigent patients. This makes pessimistic assumptions more reasonable.(46)

One positive development regarding uncompensated care can be attributed to PPS, albeit outside the Medicare program directly. Several states have been exempted temporarily from Medicare's PPS on condition that they develop their own version of prospective payment. Some have created all-payer systems, so that every insurer in the state reimburses prospectively. Included in all premiums is a fee to cover the cost of indigent care in the state. This money is pooled and redistributed to hospitals in proportion to the amount of free care they provide.(47) Unfortunately, these encouraging state experiments with prospective payments may end when their Medicare waivers expire.

In general, from the perspective of the uncompensated care issue, Medicare's PPS has made a bad situation worse. Except for the attempts of the all-payer states, the new system has made it harder for hospitals to provide free care to the needy. To the extent that PPS was designed to promote efficiency by shifting financial risk to providers competing in a health care marketplace, this result was inevitable.

The Medically Indigent

From a utilitarian point of view, to the extent that DRGs have made it harder for the medically indigent to receive adequate care, they have had bad consequences. But this result must be weighed against the good consequences of delaying the financial collapse of Medicare. Establishment of Medicare created a reasonable set of social expectations that a certain level of health care would be assured to elderly and other categorially defined Americans. Thus it acts like a promise. There are compelling utilitarian reasons for keeping promises, especially those related to persons' basic securities.

Is there a cost-effective way to maximize benefits to the nation's poor without jeopardizing the promise made to the nation's elderly? Can something besides a surreptitious cost shift be devised to care for the nation's medically needy? The experience of the all-payer states suggests there is. An explicit system-wide cost-shift is possible. Introducing the cost of uncompensated care into the premiums of all payers is one way to effect such a shift. Taxing hospital revenues is another. A general tax increase with revenue dedicated to hospital care for the poor is a third alternative. Or we could reopen discussion of national health insurance for all Americans.

Maintaining one's promises would be a central commitment for the contractarian view as well. Breach of promise is a disrespect of persons. Hence preservation of Medicare would be a contractarian priority. Moreover, without Medicare's protection, the elderly as a group are candidates for least-well-off status. They are typically unemployed and therefore lack employment-related insurance or the income to pay for needed care individually.

But unbiased contractors could not tolerate the unfairness of medical indigency. They would be assured of access to needed hospital care only if they agreed in principle that it should be available at some level for all, even the worst-off. Thus they would insist on a decent minimum of health care for all, regardless of insurance and ability to pay.


It is appropriate in concluding to offer some recommendations.

1. Close scrutiny of the role of PROs in denying access to hospital care is needed. We must develop a national system for monitoring the quality of care in other care settings after discharge from an acute care hospital. Serious penalties should be developed for discharging hospital patients prematurely and for pressuring or inducing doctors to do so. A severity of illness index should be designed and added to the DRG system.

2. Protections against the worst effects of DRG-enhanced hospital competition should be developed for hospitals that serve populations with special needs, especially rural, inner city, and specialty hospitals. Some controls should be introduced on hospitals' ability to shift DRG profits out of direct patient care. DRGs underscore the need to protect the human quality of the hospital experience. We need some way to value time spent with hospital patients and a measure of its impact on health status and patient satisfaction.

3. We need ways to prevent DRG creep, to insulate health care professionals against financial pressures, and to maintain the vitality of informed consent. Perhaps further experience with DRGs will help to develop a more adequate system of weights or more confidence in the adequacy of the present system so as to remove the temptation to "correct" the system by upcoding.

Insulating doctors against the pressures of cost-cutting may entail limiting the range of their professional choices, but the dimensions of the potential conficts here are such that this may be the lesser of two evils. If so, development of clear hospital protocols that take many of the financial choices out of doctors' hands might be desirable. In this way doctors would retain their traditional role as patient advocates within the institutional constraints set by the hospital, or by society at large.

4. The uncompensated care issue must be confronted directly. It is the problem of justice in American health care and DRGs, while not the cause of the problem, have undoubtedly exacerbated it. Now that the major means of financing this care has been overturned by government action, the time may be right for reopening debate on the appropriate role for the national government in guaranteeing access to some decent minimum of health care for all Americans. Whether we adopt a national version of the all-payer state cost shift through the DRG system, increase taxes and compensate hospitals for the care they provide the needy, or establish a system of national health insurance--this problem is urgent and must be addressed.

References 1 Paul Rettig et al., "Medicare's Prospective Payment System: The Expectations and the Realities," Inquiry 24:2 (1987), 173-88. 2 American Association of Retired Persons, "Statement of the AARP Before the Senate Finance Committee on the Quality of Medical Care," Washington, DC, June 3, 1986. 3 Mary Gallivan, "Margins Drop, Utilization Improves in 1987," Hospitals, 5 May 1988, 40-42. 4 John K. Iglehart, "Early Experience with Prospective Payments of Hospitals," New England Journal of Medicine 314:22 (1986), 1460-64. 5 Gallivan, "Margins Drop," 40. 6 U.S. Department of Health and Human Services, Report to Congress: The Impact of the Medicare Hospital Prospective Payment System, 1984 Annual Report (Washington, DC: Government Printing Office, 1985). 7 Ronda Kotelchuck, "And What About the Patients?" Health/PAC Bulletin 19 (1986), 13-17; Gallivan, "Margins Drop," 40. 8 Rettig et al., "Medicare's Prospective Payment System." 9 Michele Robinson, "ProPAC: Margins Still Near 15-Year High," Hospitals, 5 March 1988, 29-30. 10 Prospective Payment Assessment Commission, Report to the Congress: Medicare Prospective Payment and the American Health Care System (Washington, DC: Government Printing Office, 1987). 11 Ronda Kotelchuck, "In the Grips of PPS," Health/PAC Bulletin 17 (1986), 7-10; "Currents," Hospitals, 5 July 1988, 16. 12 Prospective Payment Assessment Commission, Report to the Congress. 13 William P. Hittel, "PRO Experiences at a Florida Community Hospital," American Journal of Hospital Pharmacy 44:1 (1987), 88-92. 14 Rettig et al., "Medicare's Prospective Payment System." 15 Susan D. Horn and Joanne E. Backofen, "Ethical Issues in the Use of a Prospective Payment System: The Issue of a Severity of Illness Adjustment," Journal of Medicine and Philosophy 12:2 (1987), 145-53; Eric Munoz et al., "Financial Risk and Hospital Cost for Elderly Patients," Archives of Internal Medicine 148 (April 1988), 909-912. 16 John S. Lyons et al., "The Impact of a Prospective Payment System on Psychosocial Service Delivery in the General Hospital," Medical Care 25:2 (1987), 140-47. 17 W.P. Welch, "Do All Teaching Hospitals Deserve an Add-On Payment Under the Prospective Payment System?" Inquiry 24:3 (1987), 221-32. 18 American Association of Retired Persons, "Statement." 19 Iglehart, "Early Experience." 20 Phillip K. Dunne and Judith Martin, "Experiences of the Texas PRO," American Journal of Hospital Pharmacy 44:1 (1987), 84-88. 21 Elizabeth Langer et al., "The Impact of Medicare's Prospective Payment System on a Wisconsin Nursing Home" (letter), Journal of the American Medical Association 258:5 (1987), 611-12. 22 Warren Balinsky and Jodi Starkman, "The Impact of DRGs on the Health Care Industry," Health Care Management Review 12:3 (1987), 61-74. 23 Thomas Halper, "DRGS and the Idea of a Just Price," Journal of Medicine and Philosophy 12:2 (1987), 155-64. 24 John Rawls, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971). 25 Steven Sheingold, "Unintended Results of Medicare's National Prospective Payment Rates," Health Affairs 5:4 (1986), 5-21. 26 Susan DesHarnais et al., "The Early Effects of the Prospective Payment System on Inpatient Utilization and the Quality of Care," Inquiry 24:1 (1987), 7-16. 27 Ron J. Anderson, "Economics," Journal of the American Medical Association 258:16 (1987), 2294-95. 28 Lyons et al., "The Impact of a Prospective Payment System." 29 Michael D. Rosko and Robert W. Broyles, "Short-Term Responses of Hospitals to the DRG Prospective Pricing Mechanism in New Jersey," Medical Care 25:2 (1987), 88-99. 30 Steven Golub, "The Role of Medicare Reimbursement in Contemporary Hospital Finance," American Journal of Law and Medicine 11:4 (1986), 501-27. 31 Prospective Payment Assessment Commission, Report to the Congress. 32 Horn and Backofen, "PRO Experiences." 33 Sheingold, "Unintended Results." 34 Rosko and Broyles, "Short-Term Responses." 35 U.S. Department of Health and Human Services, 1984 Annual Report. 36 Ann L. Schoofs and Thomas S. Thielke, "PRO Experiences at the University of Wisconsin Hospital and Clinic," American Journal of Hospital Pharmacy 44:1 (1987), 92-95. 37 Tinker Ready, "Hospitals are Targeting the Most Lucrative Treatments," Health Week, 14 November 1988, 9. 38 Harry Paxton, "How Badly Is Cost-Containment Hurting Patient Care?" Medical Economics 63 (1986), 48-64. 39 Theodore Bernstein, "The Impact of PPS on Medical Records Practitioners, Part I," Journal of the Medical Records Association, (November 1985), 27-34. 40 Robert M. Veatch, "DRGs and the Ethical Reallocation of Resources," Hastings Center Report 16:3 (1986), 32-40. 41 Paxton, "How Badly Is Cost-Containment Hurting Patient Care?" 42 Leonard M. Fleck, "DRGs: Justice and the Invisible Rationing of Health Care Resources," Journal of Medicine and Philosophy 12:2 (1987), 165-96. 43 See generally, E. Haavi Morreim, "Cost Constraints as a Malpractice Defense," Hastings Center Report 18:1 (1988), 5-10. 44 Charles J. Dougherty, American Health Care: Realities, Rights, and Reforms (New York: Oxford University Press, 1988). 45 Stephen F. Jencks and Terrevee Kay, "Do Frail, Disabled, Poor, and Very Old Medicare Beneficiaries Have Higher Hospital Charges?" Journal of the American Medical Association 257:2 (1987), 198-202. 46 Steven Sheingold and Thomas Buchberger, "Implications of Medicare's Prospective Payment System for the Provision of Uncompensated Hospital Care," Inquiry 23:4 (1986), 371-81: "Shift in Medicare to Hurt Hospitals in the Inner Cities," New York Times, 19 October 1988, 1. 47 William C. Hsiao and Daniel L. Dunn "The Impact of DRG Payment on New Jersey Hospitals," Inquiry 24:3 (1987), 211-20; Kenneth E. Thorpe, "Does All-Payer Rate Setting Work? The Case of the New York Prospective Hospital Reimbursement Methodology," Journal of Health Politics, Policy and Law 12:3 (1987), 391-408.
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Title Annotation:Cost Containment, DRGs, and The Ethics of Health Care
Author:Dougherty, Charles J.
Publication:The Hastings Center Report
Date:Jan 1, 1989
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