It has been proposed that Medicare pay for inpatient physicians' services on a per-case basis, giving physicians an incentive to economize on services delivered in the hospital. This report outlines the design of a possible demonstration of a system of per-case payment and considers the following key issues in developing such a design: (1) selecting the options most attractive to demonstrate, (2) participation in the demonstration, (3) setting payment rates, (4) site selection, and (5) evaluation of the demonstration. The demonstration would seek to determine how alternative methods of paying physicians would affect costs, beneficiary access and financial liability, and health status outcomes or quality of care.
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