Prior to 1983, hospitals received reimbursement fromgovernmental programs such as Medicare and Medicaid on a cost-plusbasis. That is, if the hospital reported total costs of $100 toprovide care for Medicare/Medicaid patients, it received $135 fromthe government (given a 35% cost-plus mark-up).
After 1983, hospitals received reimbursement from governmentalprograms such as Medicare and Medicaid on a fixed-fee basis. Thatis, every time the hospital provided a particular type of care (forexample, diagnosis and treatment of an ear infection) to aMedicare/Medicaid patient, it received the same payment from thegovernment (e.g., $65 for every ear infection diagnosis andtreatment).
Explain why hospitals are likely to have increased theirinvestment in accounting information systems after 1983, given thedescriptions of the two reimbursement plans. Be explicit about thecosts and benefits involved.
