An appraisal of organizational response to fiscally constraining regulation: the case of hospitals and DRGs.

Results from analysis of 227,771 discharge abstracts from 68 short-term, acute-care hospitals and from interviews with a stratified random selection of 24 of the 68 chief executives of these hospitals demonstrate that institutions perceive implementation of DRGs as fiscally constraining, especially in light of other resource-constraining conditions (an increase in unemployment resulting in fewer people with hospitalization insurance, in addition to severe cuts in Medicaid rolls and budget). Hospitals responded to DRGs by decreasing the use of affected resources or services available to the hospitalized Medicare patient. In order to survive a more economically stringent marketplace, hospitals no longer protected the traditional core within the Medicare inpatient market. They opted instead to change practices and products at the unregulated margins of the DRG system.