Hospital Corporation of America and Subsidiaries - Page 22

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               Petitioners' system of billing, typical of most hospitals,             
          has evolved over time in conformity with the reimbursement                  
          practices and procedures of private insurance companies as well             
          as Medicare and Medicaid, and in conformity with State laws and             
          regulations.  During the beginning of the 20th century, hospitals           
          typically charged for their services on a per-case or per diem              
          basis.  Subsequently, with the advent of the private health                 
          insurance industry, particularly Blue Cross/Blue Shield                     
          organizations, pressure was placed on hospitals to develop a                
          charging structure which would enable the insurer to measure the            
          degree of service furnished to each patient so that the insurer             
          company could assure itself that it was not subsidizing the cost            
          of care furnished to other patients.  Consequently, insurance               
          companies required hospitals to detail charges and to bill for              
          services on a departmental basis.                                           
               Until 1983, Medicare and Medicaid paid hospitals based on              
          the cost of services as computed under a formula using the                  
          detailed charges listed by the hospitals.  Effective with                   
          Medicare cost reporting periods beginning on and after October 1,           
          1983, however, Medicare began to phase in, over a 3-year                    
          transition period, its system of paying hospitals for inpatient             
          services on the basis of diagnostic related groups (DRG’s).                 
          Under that system, hospitals are paid a flat amount for a                   
          particular procedure, such as a gall bladder operation,                     
          regardless of the precise course of treatment administered to the           




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Last modified: May 25, 2011