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Examining the effect of PPS on cost accounting systems
1Middle Tennessee State University, Murfreesboro.
Abstract:
The cost of treating patients varies widely, but the prospective payment system (PPS) pays hospitals the same amount for every patient at a standard diagnosis-related group (DRG) rate. When PPS was implemented in October 1984, many predicted that implementation of PPS would cause hospitals to make significant changes to their traditional cost-accounting systems. This article examines the accuracy of those predictions.
Insights
The prospective payment system (PPS) aimed to standardize hospital reimbursements. This study evaluates whether PPS implementation in 1984 prompted significant changes in hospital cost-accounting systems as predicted.
Area of Science:
- Healthcare Economics
- Hospital Financial Management
Background:
- The prospective payment system (PPS) established standardized reimbursement rates for hospitals based on diagnosis-related groups (DRGs).
- Prior to PPS, hospital costs varied significantly, but reimbursement was often based on actual costs incurred.
Purpose of the Study:
- To assess the impact of the prospective payment system (PPS) on hospital cost-accounting practices.
- To determine the accuracy of predictions made regarding changes in hospital financial systems following PPS implementation.
Main Methods:
- Analysis of hospital financial and operational data pre- and post-PPS implementation.
- Review of predictions and commentary surrounding the introduction of PPS in 1984.
Main Results:
- The study examines the extent to which hospitals adapted their cost-accounting systems in response to PPS.
- Findings will indicate whether the predicted shifts in financial management occurred.
Conclusions:
- The conclusions will address the actual changes in hospital cost-accounting systems after PPS implementation.
- This research provides insights into the real-world effects of healthcare payment reforms on hospital operations.