Decentralized Management in a Teaching Hospital

For more than a decade American hospitals have been asked to contain costs. The most recent program is the Medicare prospective payment system, which reimburses hospitals a fixed price per case based on diagnosis-related groupings (DRGs). If this approach proves successful, it may be adopted by other payers and perhaps extended to the reimbursement of physicians through prospective professional fees. Hospital reaction to the new payment scheme varies. Some look for cost controls and more efficient management techniques to reduce expenses; others carefully analyze their mix of DRGs to measure which are profitable and which involve unusual and expensive services. . . .