ABSTRACT
Overcharges in hospitals for technology and drugs raised serious questions about the retrospective payment system. The system was corrected, in part, by the introduction of prospective reimbursement, but this provided no real control over unnecessary treatment, although it did control the total expenses in the system. A hospital might be paid too much or too little for a given case, but statistically the average should work out to be fair to everyone. A national commission was also set up by the Office of Technology Assessment to identify medically appropriate patterns for the use of health resources and to establish the payment increase each year as the result of inflation. The Diagnostic Review Group (DRG) method attempts to take all of these factors into consideration when assessing the cost of care. The original idea of the DRG was to control utilization, but that idea has been shifted to measure resource consumption and cost containment.
