Recalibrating Medicare Payments for Inpatient Care

Ginsburg New England Journal of Medicine Perspective Examines Medicare Inpatient Payment Changes

Media Advisory
Nov. 16, 2006

Alwyn Cassil (202) 264-3484 or

WASHINGTON, DC—Small but important steps to improve the accuracy of Medicare inpatient hospital payment rates could help stem a growing medical arms race, but policy makers will need to follow through in the coming years with more comprehensive reforms, according to a perspective by economist Paul B. Ginsburg, Ph.D., in the Nov. 16 New England Journal of Medicine.

"Without policies that ensure more accurate payment methods, providers will increasingly gravitate toward the medical problems and procedures that boost their bottom lines, and the care we receive may not be the care we need," writes Ginsburg, president of the Center for Studying Health System Change (HSC), a nonpartisan policy research organization funded primarily by the Robert Wood Johnson Foundation.

Changes in Medicare’s final Aug. 1 inpatient prospective payment system rule "are meant to better align relative payment rates for different services with the relative costs of providing them. This alignment would reduce incentives for hospitals to focus on more profitable services at the expense of less profitable ones that may have equal clinical value," according to the article.

Ginsburg cautions, however, that there is no guarantee the Centers for Medicare and Medicaid Services "will follow through on" comprehensive changes to inpatient payment rates to better identify the severity of patients’ conditions and the resources hospitals use to care for patients, noting that "doing so will require a continued commitment to improving payment accuracy in the face of resistance from affected stakeholders."

To access the perspective, "Recalibrating Medicare Payments for Inpatient Care," go to

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.