Literally, cost per day. Refers, in general, to hospital or other inpatient institutional costs per da}^ or for a day of care. Hospitals occasionally charge for their services on the basis of a per diem rate derived by dividing their total costs by the number of inpatient days of care given. Per diem costs are therefore averages and do not reflect true cost for each patient. With this approach patients who use few hospital services (typically those at the end of a long stay) subsidize those who need much care (those just admitted). Thus the per diem approach is said to give hospitals an incentive to prolong hospital stays.