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DRGs are not the answer

T F Zenty

    Hospital & Health Services Administration
    |October 7, 1985
    PubMed

    Insights

    Healthcare spending in 1984 neared $400 billion, prompting changes in medical care financing. Greater savings are achievable by restructuring the healthcare environment, not just hospital payment systems.

    Area of Science:

    • Health Economics
    • Healthcare Policy
    • Medical Services Financing

    Background:

    • In 1984, US healthcare spending reached nearly $400 billion, with double-digit annual increases necessitating changes in financing.
    • The Tax Equity and Fiscal Responsibility Act introduced prospective payment for hospitals, impacting healthcare economics.
    • Despite improvements, 1984 saw a 9.1% rise in total healthcare spending and a 6.2% increase in medical prices.

    Purpose of the Study:

    • To evaluate the impact of the Tax Equity and Fiscal Responsibility Act on healthcare financing.
    • To propose alternative strategies for achieving greater cost savings in the healthcare sector.
    • To argue for a broader restructuring of the healthcare environment beyond hospital payment mechanisms.

    Main Methods:

    • Analysis of healthcare spending data from 1984.
    • Review of the effects of the Tax Equity and Fiscal Responsibility Act.
    • Comparative analysis of cost-saving strategies in healthcare.

    Main Results:

    • Healthcare spending and medical price inflation showed improvements compared to prior years.
    • The prospective payment system marked a significant shift in hospital financing.
    • The study suggests current reforms are insufficient for realizing maximal cost savings.

    Conclusions:

    • While hospital payment reforms offer some savings, they are not the sole solution for controlling healthcare costs.
    • Significant financial benefits can be achieved by addressing broader systemic issues within the healthcare environment.
    • A comprehensive restructuring of healthcare elements is recommended for substantial and sustainable cost reductions.

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