In view of the apparent initial success of the Medicare hospital prospective payment system (PPS) in slowing the rate of increase in Medicare outlays for hospital care, there have been suggestions to extend the system to include the posthospital care provided to Medicare patients by skilled nursing facilities and home health agencies. This report discusses the nature of an extended PPS, its potential benefits, and ways reimbursement rates might be set. It also addresses how a demonstration could be mounted, what could be learned from it, who would have to participate in it, and how demonstration sites might be chosen.
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