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A new approach to capital payment in a competitive era.

Prologue: One important item on the health agenda of the new Congress will be the formulation of a policy to prospectively pay hospitals for the Medicare portion of their capital costs. When the Medicare prospective payment system was signed into law in 1983, Congress delayed its decision on how to fund capital costs until it could research the issue more fully. Now, with the October 1987 deadline for determining a capital payment policy around the corner, discussion of capital issues has been active among the health policy community. In this article, Jonathan Betz Brown analyzes the thought behind the various flat-rate capital payment proposals under consideration, asserting that while they look simple and effective, they probably are not. Additionally, they “will get us into deep trouble in the long run,” he argues. The author then presents a new approach to capital payment that has emerged from a three-and-a-half-year study by the Harvard Health Capital Project. This proposal of “planned payment” looks...