As part of the Tax Equity and Fiscal Responsibility Act, what was established for hospitals receiving Medicare reimbursement?

The establishment of Diagnosis-Related Groups (DRGs) as part of the Tax Equity and Fiscal Responsibility Act (TEFRA) marked a significant change in how hospitals are reimbursed for Medicare services. DRGs categorize hospital services into groups based on the diagnosis and treatment received, allowing for a fixed payment system. This system encourages hospitals to provide efficient care while controlling costs, as reimbursement is standardized regardless of the actual expenses incurred by the hospital for a patient's stay.

Prior to the implementation of DRGs, hospitals were reimbursed on a cost-plus basis, which did not incentivize efficient resource use. With DRGs, hospitals are motivated to reduce unnecessary tests and procedures, which in turn promotes more patient-centered approaches to care. The classification further allows for benchmarking of hospital performance and drives improvements in the quality of care delivered.

While patient-centered care models, increased funding for nursing care, and expanded home care services are all important aspects of healthcare delivery, they are not direct outcomes or components established specifically through TEFRA. The focus of TEFRA was primarily on the payment structure and financial accountability for acute care hospital services, further emphasizing the critical role of DRGs in transforming the hospital reimbursement system under Medicare.