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  • Title: The effects of a fixed-fee reimbursement system introduced by the Federal Government on laboratory testing in the United States.
    Author: Takemura Y, Beck JR.
    Journal: Rinsho Byori; 1999 Jan; 47(1):1-10. PubMed ID: 10067359.
    Abstract:
    Rapid growth of health care expenditures during the 1970s in the United States led to implementation of a prospective payment system (PPS) based on diagnosis-related groups (DRG) for Medicare inpatient reimbursement in 1983. With the introduction of DRG/PPS, hospitals encouraged earlier discharges and discouraged admission of patients who may require expensive services. Patient care has moved into more outpatient and non-hospital settings which have been less regulated and paid on a cost-reimbursement basis. The change of reimbursement system has converted hospital laboratories from "profit center" under the fee-for-service reimbursement practice to possible "cost center" at least for inpatient laboratory services with the advent of DRG/PPS. Hospitals have reduced laboratory operating expenses by constraining laboratory growth and development. Laboratory testing in non-hospital settings such as physicians' office laboratories, which were exempt from license and quality control by governmental regulations, has increased exponentially since implementation of DRG/PPS. To improve the quality of laboratory testing in such unregulated laboratories, the federal government has promulgated the Clinical Laboratory Improvement Amendments of 1988 (CLIA '88), requiring on-site survey and license under CLIA '88 for all laboratories in the United States regardless of the size, complexity, or location of laboratory. Implementation of DRG/PPS resulted in a temporary success in reducing Medicare Part A budget growth, but had only a small impact to slow the actual growth of total national health care expenditures or laboratory-related expenditures. Nevertheless, the change of reimbursement practice has created a large incentive to reduce unnecessary resource utilization, and cost-effective laboratory testing has become an essential concept during the DRG/PPS era.
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