Medicare uses an Acute Inpatient Prospective Payment System to pay hospitals fixed amounts per admission for inpatient services based on diagnosis related groups (DRG) for the patient's condition. In October 2012 Medicare began reducing payments to hospitals whose readmission rates exceeded predicted rates for each condition. Which of the following statements best explains why Medicare had to impose penalties on hospitals using DRG-related prospective payment systems?

Hospitals were typically using up their annual fixed budget from Medicare by the last two months of the year and discharging patients too early to save costs.

The payment system created an incentive for hospitals to discharge patients as quickly as possible, including some who were being discharged too early

Too many patients were leaving hospitals against medical advice because the food was so bad. Medicare needed to induce hospitals to improve menu options to retain patients for their whole courses of treatment.

Hospitals were keeping patients in the hospital too long leading to excessive costs to the Medicare budget