Prospective Payment for CHAMPUS Exempt Services

An Analysis of Children's Hospitals, Substance Abuse Services, and Psychiatric Services

by Jack Zwanziger, Elizabeth M. Sloss, Susan D. Hosek, Anil Bamezai, Lois M. Davis, K. M. Cameron


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In an effort to control rapidly increasing costs, the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) adopted a prospective payment system for inpatient services in October 1987. This report presents the results of an analysis of prospective payment options for three services exempt from the CHAMPUS diagnosis-related group (DRG) payment system. Although specific issues differ for children's hospitals, substance abuse services, and psychiatric services, the report considers (1) the characteristics of the use of these services under CHAMPUS, (2) alternative payment systems CHAMPUS would consider for implementation, (3) how well these payment options capture differences in resource use across patients and hospitals, (4) whether modifications of previous methods are necessary because of the unique characteristics of the CHAMPUS population, and (5) the impact of a DRG system on hospitals' CHAMPUS revenues, especially for hospitals with high CHAMPUS volumes.

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