Prospective Payment

Carl J. Schramm, Jon Gabel

Research output: Contribution to journalEditorialpeer-review

32 Scopus citations


Faced with rising budget deficits and the expected doubling of Medicare costs within the next five years, Congress directed in 1982 that Medicare develop a prospective payment system for reimbursing hospitals. The establishment of that system, popularly known as DRGs (diagnosis-related groups), marked a dramatic turning point in the payment of hospitals by Medicare. By severing the direct link between the provision of services and payment for them, prospective payment reversed the incentives for hospitals, offering the reward of increased profits rather than reduced revenue for cost-effective care. Proponents of prospective payment argued that the new system would trim an.

Original languageEnglish (US)
Pages (from-to)1681-1683
Number of pages3
JournalNew England Journal of Medicine
Issue number25
StatePublished - Jun 23 1988
Externally publishedYes

ASJC Scopus subject areas

  • General Medicine


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