Summary: Testimony was given on: (1) the quality of care the Medicare system provides under the new prospective payment system (PPS); and (2) whether the quality review systems have effectively controlled the problems which could arise from cost incentives built into PPS. Prior to PPS, hospitals' financial interests could result in some patients remaining in hospitals longer than medically necessary. PPS removed the financial incentive to provide more health care services than needed; however, the discharging of patients still in need of hospital care has become a primary concern. In addition, discharged patients who are not sufficiently recovered to care for themselves are likely to experience problems if they do not receive appropriate and competent post-hospital care. Essential information is lacking on the extent to which hospitals are prematurely or inappropriately discharging patients. A combination of measurement problems, fragmented administrative responsibilities, and a decreased emphasis on research and development has created significant barriers to obtaining better information. To overcome these barriers, significant efforts are needed to: (1) improve the review system so that it can generate valid and nationally representative information on quality problems; and (2) devise ways to use this information to make systematic improvements in quality of care. GAO believes that there should be effective mechanisms that provide patients with the procedures to deal with problems related to hospital discharge decisions and post-hospital care placement. However, without better information on the nature of the quality of care problems, the basis for considering more extensive policy changes intended to adjust the basic incentive structure of PPS or substantively change Medicare eligibility criteria or its coverage of health care services is lacking.
