The New England journal of medicine
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Medicare's system for the payment of rehabilitation hospitals is based on limits derived from a hospital's average allowable charges per patient discharged during a base year. Thereafter, payments are capped but hospitals receive incentive payments if charges per patient are reduced in succeeding years. We hypothesized that per-patient charges would increase during the base year and then decrease in subsequent years. Hospitals would thus have higher reimbursement limits and receive incentive payments for reducing their charges. ⋯ Although Medicare's reimbursement system for rehabilitation hospitals put an upper limit on total payments, its design was associated with substantial extra costs, including significantly increased payments to hospitals and doctors and increased numbers of hospital days for the average patient.