Hospital Downsizing: A Case Study

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Discuss the three main forces that have been responsible for hospital downsizing: changes in reimbursement, growth in managed care, and hospital closures. How has each of these forces been responsible for the decline in inpatient hospital utilization? Reimbursement is one of the leading causes in hospital downsizing. Changes in hospital reimbursement had a dramatic impact on hospitals. The Tax Equity and Fiscal Responsibility Act in 1982 (TEFRA) was a law passed by President Reagan. The ERTA was a part of tax legislation which lowered income tax rates, and all very high rates were given a maximum of 50%. The TEFRA adapted features of the ERTA which produced worry over large budget shortages. TEFRA improved the tax recognized but not the tax rates. This was completed by eliminating some of the tax breaks businesses received in the ERTA, such as the upsurge in the quantity of faster depreciation that a company could take away. “Medicare reimbursement from cost-plus to a prospective payment system (PPS marked a major change in the way hospitals were paid for)”. Numerous states embraced approaches to reimburse hospitals for Medicaid patients. Prospective payment system (PPS) required hospitals are paid a secure amount according to the patient's diagnosis,…show more content…
Small rural hospitals had to close because of financial limitations. Some hospitals were forced to close whole wings and change beds to long-term care and psychiatric care. Health Care Financing Administration (HCFA) formed a bed program for rural hospitals, this program was called Swing bed-program. “Swing bed- program created additional revenues for small rural hospitals by allowing them to switch the use of hospitals beds between acute-care and long-term care skilled nursing facility”. In the 1990s rural hospitals faced many problems plus complications. During the period 1994 through 1997, a total of 28 rural hospitals closed, an average of 7 a
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