For those unfamiliar with the US health care system, Medicare’s hospital payment likely makes little sense. Medicare uses the prospective payment system to pay a hospital a fixed amount of money for a hospitalization: the Diagnosis Related Group (DRG) payment. The DRG payment covers all hospital-related expenses, except for physician services. For instance, the radiology technician who obtains the x-ray is paid under the DRG payment, but the radiologist who reads the x-ray is paid separately for each film read. The nurse who delivers a medication is paid under the DRG payment, but the physician who orders the medication is paid separately for each visit. Most private health plans mimic this fragmented payment method.
Mehrotra A, Hussey P. Including Physicians in Bundled Hospital Care Payments: Time to Revisit an Old Idea? JAMA. 2015;313(19):1907–1908. doi:10.1001/jama.2015.3359
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