The Children’s Hospital and Health Center of San Diego, California, USA, has significantly lowered the cost of providing care and the length of hospitalization through measurably increasing its quality outcomes. Yet, under the current business model of per diem payment, the hospital has forfeited millions of dollars in annual revenue. This study examines the per diem payment structure typical for children’s hospitals and how reducing length of stay thereby gives children’s hospitals a financial loss. (Part of a series of case studies supported by The Commonwealth Fund and published in the journal, "Health Affairs.")

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