Recent evidence on case-based systems for setting hospital rates

Abstract

Medicare's adoption of the Prospective Payment System (PPS) was the culmination of years of research and demonstrations to establish case-based systems for setting hospital rates. This paper examines the procedures and findings of the early programs in New Jersey and Maryland, as well as the Medicare case-based system that was established pursuant to the experience in these two states. This is followed by an examination of the recently established Medicaid case-based systems in Utah, Pennsylvania, Ohio, Michigan, and Washington and the case-based systems established by some Blue Cross and Blue Shield Plans. The strengths and weaknesses of these systems are discussed, and suggestions are made for improving the evaluations of these systems.