The escalating cost of medical care in most industrial countries has given impetus to several different strategies designed to impose limitations on cost and introduce efficiency into health care systems. In the United States of America, legislation was passed in 1983 to introduce a system of prospective payment for Medicare hospital expenditures. This change was a departure from the previous cost based reimbursement method and was based upon a categorisation of medical conditions into discrete groups termed diagnosis-related groups (DRGs). The intention of the American Congress in passing the legislation was to encourage hospitals to reduce cost without sacrificing quality of care.
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