The modernization of hospitals and hospital services can be traced back to 1840 when facilities began to change their focus from caring for the impoverished and mentally ill, to becoming a place known for providing complete health care to the population. After the Second World War, the government identified a deficiency in the health care system and the response to was passage of the Hill-Burton Free and Reduced Cost Health Care Act in 1946.
The Hill-Burton Act provided government subsidies to aid in the construction and modernization of local government hospitals as well as not-for-profit facilities. Hill-Burton established a goal ratio of 4.5 beds for every 1000 people; the greatest period of hospital growth due to this legislation was from 1947 to 1971 when an estimated $33 billion in governmental funding was distributed, with the goal being reached in 1980.
However, beginning in the mid-1980’s changes in the reimbursement of claims for government-sponsored health care programs, managed care and the affect it had on the healthcare market place, and hospital closures, led to hospital downsizing to include the number of available inpatient beds as well as the number of facilities in operation.
The Effect of Changes in Hospital Reimbursement
Until the passage of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), all claim reimbursement for services rendered was based on individual charges. This was an itemized billing for each day spent in a hospital bed as an inpatient, including charges for the services provided by other departments such as laboratory, radiology, and the various ancillary services that may have been provided to the patient as part of their hospitalization.
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In some cases, closed facilities and areas within a facility were converted to other uses, including expansion of outpatient services and programs, but the underlying cause for the closure of the facilities was underutilization and the cost of maintaining underperforming facilities.
To an extent, hospital downsizing is the result of the successful implementation of cost- saving programs that have shifted the primary areas for patient care from inpatient to various outpatient care facilities and disciplines. Beginning with the shift from cost-plus billing to PPS using DRG reimbursement and managing care to increase efficiency and reduce cost, the need for inpatient hospital beds has continued to decrease in response to the lessening need while the utilization of outpatient services continues to grow to meet the needs of patients and providers.
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