Unbiased Analysis of Today's Healthcare Issues

Uwe Reinhardt on Hospital Prices

Written By: Jason Shafrin - Feb• 01•09

Health Economist Uwe Reinhardt supports expanding the DRG system to all payers.  

“Under Medicare’s approach, hospitals are paid one price for an entire inpatient episode, rather than piece-rate (fee-for-service) for every single supply and service delivered in that episode…To eliminate the rampant price-discrimination inherent in current hospital pricing, all hospitals under this system would be required to charge all patients the same price for a given D.R.G. Ideally, this stricture should apply even to patients covered by Medicare or Medicaid, as is done in the “all payer” system that has long been operating in Maryland and seems to have worked well there…Payments in addition to the case-payment would have to be made for highly complex cases — so-called “outliers.” Medicare has decades of practical experience with that problem as well.”

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  1. Publius says:

    Is it just me or is Mr Reinhardt confusing the matter, conflating bundled procedural-based payments (i.e., DRGs) with episode-based payments, which don’t yet don’t yet exist, except in experimental form and in the mind of Tom Daschle (WSJ had a good article on this).

    UR says:
    “In a nutshell, my proposal calls for applying to all patients the payment method developed by Medicare during the 1960s and 1970s and mandated upon all American hospitals by the Reagan administration in 1983. This approach has been so successful that in the meantime it has been adopted by other industrial countries as well — notably by Australia, France and Germany.

    Under Medicare’s approach, hospitals are paid one price for an entire inpatient episode, rather than piece-rate (fee-for-service) for every single supply and service delivered in that episode.”

    Huh? DRG dominates the market. The problem is NOT that private payers aren’t utilizing the DRG. It’s that we haven’t found how to be best bundle payments for inpatient and outpatient procedures, physician payments, etc.

    I think UR’s article only confuses this issue.

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