A longitudinal comparison of charge-based weights with cost-based weights

The diagnosis-related group weights that determine prices for Medicare hospital stays are recalibrated annually using charge data. Using data from fiscal years 1985 through 1987, the authors show that differences between these charge-based weights and cost-based weights are increasing only slightly. Charge-based weights are available in a more timely manner and, based on temporal changes in the weights, we show that this is an important consideration. Charge-based weights provide higher payments than cost-based weights to hospitals with higher case-mix indexes, but have little effect on hospitals with low cost-to-charge ratios, high capital costs, or high teaching costs.