Changes in Reimbursement …show more content…
The PPS changed reimbursement from a program where hospitals were reimbursed based on actual expenditures, to the PPS where hospitals were reimbursed a predetermined rate based on the patients Diagnosis Related Group (DRG). For example, Medicare would reimburse a hospital X amount of dollars for a patient discharged from the hospital with a primary diagnosis of pneumonia, regardless of patient length of stay, costs incurred, and complications. The federal government viewed this move as a way to “encourage hospitals to restrain the use of resources while providing high-quality inpatient care” (Davis & Rhodes, 1988, p.