Prospective Payment: A Simulation Model Of Management Strategies.

A simulation model developed to evaluate the financial effects of different management policies to face Medicare\u27s Prospective Payment system is presented. This payment system, enacted by the US Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, limits Medicare\u27s reimbursement per patient to a fixed amount depending on the patient\u27s particular type of disease. The reimbursement is based on a set of diagnosis related groups (DRGs), which categorizes patients into disease classifications. As a result, hospitals must make efficiency gains and managers must look for new ways to provide quality care while containing cost. SLAM was the simulation language chosen. The network and discrete-event portions are described in detail. The approach used to select specific DRGs for the analysis, as well as the statistical models used, preparation of input data, simulation routines and results of two runs are presented to illustrate how policies are simulated and results interpreted