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February 1985

The Prospective Payment System, Diagnosis-Related Groups, and the New World of Health Care

Author Affiliations

Hershey, Pa

Arch Ophthalmol. 1985;103(2):185-186. doi:10.1001/archopht.1985.01050020037012

The passage of public law 98-21, the Social Security Amendments of 1983, changed the American health care delivery system forever. Hospital reimbursement has been changed from a system of retrospective payments for costs incurred to a system of predetermined fixed payments for care irrespective of costs, based on diagnosis-related groups (DRGs). There are 470 DRGs, 13 of which apply to ophthalmology. Each DRG has a fixed reimbursement rate, and all acute care hospitals now receive that payment for services rendered to each Medicare beneficiary discharged with the same or similar diagnosis. The phase-in of the Prospective Payment System (PPS) began on Oct 1,1983,1 with reimbursement rates based on historical data from fiscal year (FY) 1981. While hospital-specific rates are presently blended with national rates, only a national rate with adjustments for urban vs rural hospitals will be used in calculating DRG payments when the phase-in is complete (Oct 1,

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