State Commission on the Efficacy of the Certificate of Need Program Certificate of Need and its Effect on Cost, Quality, and Access in Georgia

Medicare and Medicaid originally paid for hospital services using a “cost plus” reimbursement basis, where hospitals were paid for all of their costs and more. Under this reimbursement system, hospital profits were directly linked with patient volumes. While the basis of the argument for this set of circumstances, i.e. “supply creating demand,” may have been valid during the “cost-plus reimbursement era” before the implementation of the prospective payment system (“PPS”) for hospitals in 1983, it is widely asserted that it has not been demonstrated to be the case today, in an era characterized by the shifting of financial risk to providers.