question: How might a split-cost type system be implemented at a less specialized hospital? What kinds of implementation problems do you foresee and how would you avoid them? What importance or relevance do you attach to the distinction between procedures and diagnoses? What bearing does this distinction have on the transferability of the MEEI system?

MASSACHUSETTS EYE AND EAR INFIRMARY (MEEI)*

Mr. Charles Wood, Executive Director of the Massachusetts Eye and Ear Infirmary (MEEI), was reviewing the results of a new cost accounting system which the hospital had installed in 1976. The new system contained several innovative features, and the past year had been a trial period for it. Mr. Wood was now interested in persuading Medicare and Medicaid to accept the system for reimbursement; Blue Cross had adopted it at the outset of the pilot program. Central to his thinking were two issues: (1) whether the system actually represented a more accurate picture of hospital costs, as proponents of the system claimed; and (2) what impact the system was having on cost containment in the hospital. Wood was also concerned about transferring the system to less specialized hospitals, since his preliminary feedback from the industry indicated that some individuals questioned whether the system was applicable to a general hospital.

HISTORY OF THE MEEI

In 1974, the MEEI celebrated its 150^th anniversary. During the century and a half from its inception in 1824 as a free clinic located on the second floor of Scollay