The reimbursement of hospital Part A cost by Medicare under the original prospective payment system (PPS) created serious financial problems for hospitals in many areas but was especially serious in patients receiving mechanical ventilation. Subsequent revisions of the PPS corrected some of the financial burden of the cost of such patients when the patient required tracheostomy for prolonged ventilator care, Diagnosis Related Group (DRG) 483. The problem that remains, however, is that only patients with a medical diagnostic classification (MDC) within the MDC 4 area, Diseases and Disorders of the Respiratory System, qualify for DRG 475, the only DRG other than DRG 483 that recognizes the cost of mechanical ventilation. This study evaluates the Part A costs of medical and surgical patients who received mechanical ventilation for ≥ 3 days during 1 year at Saint Marys Hospital and Rochester Methodist Hospital in Rochester, MN, who did not qualify for DRG 475. The analysis of the financial effect of these patients under the Medicare system reveals a significant monetary loss and this is compared to other payor groups.