www.researchgate.net/publication/2866561...l_and_cultural_story
Abstract:
In 1983, DRGs became the price-setting system for the Medicare program in the United States. Why did the United States choose DRGs? The idea of setting 518 diagnostic payment rates for 4,800 hospitals seemed unimaginably complicated, too technical and an exercise in formula-driven cost control to some observers – an ambitious endeavor unlikely to succeed. Nevertheless, since its inception, the DRG system has been called the single most significant post-war innovation in medical financing in the history of the United States (Mayes 2006), and may be the most influential health care management research project ever developed. As the chapters in this volume attest, worldwide adoption of DRGs followed in the wake of this American experiment. Other competing patient classification systems could have been selected (Pettingill and Vertrees 1982). The range of policy options included flat rates per discharge, capitation, expenditure caps, negotiated rates, and competitive bidding (Smith 1992). Although researchers continue to experiment with alternative patient classification systems, a critical mass has formed around DRGs as the dominant design for measuring a hospital's casemix. A dominant policy design not only obtains legitimacy from the relevant community, future innovations must adhere to its basic features (Utterback 1996). A dominant design does not have to outperform other innovations; it merely has to balance the stakeholder interests. Though the control of rising health costs is a major policy issue, American hospitals had come to expect “pass-throughs, bail-outs, and hold-harmless clauses” from the political system (Smith 1992, p 44). © Cambridge University Press 2008 and Cambridge University Press, 2010.
DRG's started the movement to the paperwork world. In 1992, came the PPO's:
A definition from Wikipedia,
In health insurance in the United States, a preferred provider organization (PPO), sometimes referred to as a participating provider organization or preferred provider option, is a managed care organization of medical doctors, hospitals, and other health care providers who have agreed with an insurer or a third-party administrator to provide health care at reduced rates to the top insurer's or administrator's clients.
During the time leading to 1992, doctors and hospitials were scrambling to form alliances. Again several layers of administration were added to deal with the complexity. of these relationships.
In the Wikipedia article, it is noted that the first PPO started in St. Luke's Medical Center (now Presbytarian/St. Luke's) in 1990.
Then there was this: from the Orlando Sentinel Jan 1, 1992:
The most far-ranging change in Medicare since it began setting hospital rates in 1983 takes effect today. This time, Medicare is setting rates for doctors.
And also this: in the 80's, the merging of hospitals created such behemoths as Humana, HealthOne, United Healthcare, etc. The more complex the organization, the more administrators needed..
These factors and others became out of control in the early 1990s and it became "Katie bar the door".