This paper examines the implications of using a Medical Staff Payment System (MSPS) for reimbursing physicians for services provided to inpatients. Inpatient episodes are defined to include seven days before admission and 30 days postdischarge. Simulations are performed using Medicare Part A and B data from nine states in 1988. DRGs are strong predictors of expenditures on physician services during the inpatient episode, achieving an R2 of .61. Gains and losses for various types of facilities are simulated, and the characteristics of winning and losing hospitals under an MSPS are identified.