Were hospitals selective in their product and productivity changes? The top 50 DRGs after PPS

Five separate hospital products are identified based on the concept of the amount of disease remission achieved by the hospital. The parameters of this concept are illness level on admission and discharge location. In a cohort of 646 nonfederal, short-term hospitals over the period 1980-1984, changes in the hospital product are examined separately in the 50 diagnosis-related groups (DRGs) with the greatest volume of Medicare discharges. Productivity changes, as defined by the number of certain inputs, are also examined. In both sets of analyses, patient severity level is controlled for by indexing to the base year (1980) case mix. The purpose of this study was to examine whether the dramatic product and productivity changes following implementation of the prospective payment system, as found in our earlier work, were across-the-board changes or the result of selective changes, specific to certain DRGs or products. The results suggest that the changes were an across-the-board phenomenon. Policy implications are discussed.