Hospital charges and length of stay for inguinal hernia and acute appendicitis patients were examined in a university hospital to determine the degree of variation with DRGs. Evidence presented here suggests that DRGs may lead to a reduction in medical care costs without a reduction in patient outcomes. Mode/year DRGs to take account of source of admission and maintaining outliers payments may be desirable to avoid patient selectivity and incentives for lowering quality of care of the most severely ill patients.
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