Case-based payment and the control of quality and efficiency in hospitals

Case-based payment systems are rapidly becoming the dominant force in current efforts to control hospital inpatient expenditures. But as reliance on them grows, so does the fear that some, if not all, of the resulting reductions in costs will be achieved at the expense of lowering quality of care. In this paper we argue that such fears, while justified, may keep us from recognizing the positive effect that case-based payment systems can have on quality of care: These new payment systems are likely to foster controls that, to the extent they are successful in increasing efficiency, are also well suited to the control of quality of care. We discuss how and why hospitals can be expected to adopt control systems that are explicitly aimed at enhancing both efficiency and quality.