Health Affairs, 25, no. 1 (2006): 44 doi: 10.1377/hlthaff.25.1.44 © 2006 by Project HOPE	New Online   House Health Reform Bill   Paying for Reform   Vetting AHIP's Report   HIV/AIDS Costs   Brief: Insurance Reform   HA Blog Top 10

This Article Extract Reprint (PDF) Submit a response to this article Alert me when this article is cited Alert me when Comments are posted Alert me if a correction is posted Services E-mail this article to a friend Similar articles in this journal Alert me to new issues of the journal Add to My Personal Archive Download to Citation Manager Reprints & Permissions Citing Articles Citing Articles via Google Scholar Google Scholar Search for Related Content

Pricing & Payment

PROLOGUE

Pricing And Payment Issues For Hospitals

Christopher Tompkins, an associate professor at Brandeis University’s Schneider Institute, and his colleagues describe the development of the current hospital pricing system, its origins in cost-based pricing, and its rocky transition to a billed-charges system that includes multiple, fragmented payment systems negotiated with the government, third-party private insurers, and uninsured patients. He describes a system guaranteed to promote distortion in the relationship between cost, price, and hospital revenue.

Uwe Reinhardt of Princeton University’s Woodrow Wilson School surveys the current pricing system used by U.S. hospitals. He describes a system distinguished by huge variations in cost for the same procedures, peopled by blindfolded consumers uncertain of what they are purchasing or what it costs and what they are charged. With the advent of consumer-driven health care, Reinhardt proposes the adoption of a more streamlined set of universal prices for procedures and diagnoses that could be made available for consumers everywhere. The challenge will be great, but the consequences of failure may doom consumer-driven care.

The last two papers focus on Medicare. William Scanlon, senior adviser to the National Health Policy Forum, looks at current Medicare policies, particularly its prospective payment system (PPS) and adjustments to its diagnosis-related group (DRG) charges, for help in the short term to constrain cost. Len Nichols, director of the Health Policy Program at the New America Foundation, and his coauthor, Ann O’Malley of the Center for Studying Health System Change, see promise in the future—particularly in Medicare’s pay-for-performance (P4P) experiments. Both Medicare and private P4P experiments have begun to report data on specific procedures or measures of care. Nichols and O’Malley advocate moving these experiments to pay for outcomes and health status changes; they finally lead us out of the darkness to Utopia.

                      What's this?