Ch. 3: Medicare Payments: Hospital Inpatient (p. 48)

Question 1

Hospital Inpatient Payment

Answer 1

Medicare pays hospitals for IP care on a bundled services unit basis: prospective payment system (PPS).

1. Prospective payments: (a) MSDRG operating payment & (b) MSDRG capital payment (detail below for both (a) & (b));
2. Reasonable cost payments:
   Bad debts, organ acquisition, graduate medical education.

(a) DRG operating payment:
Base rate;
Adjustments for wage index, labor, non-labor, MSDRG weight;
Indirect medical education;
Disproportionate share;
Quality performance (HRRP, VBP, HAC);
Transfers;
Outliers;
New technology.

(b) MSDRG capital payment:
Base rate;
Adjustments for wage index, COLA, MSDRG weight;
Indirect medical education;
Disproportionate share;
Transfers;
Outliers.

Exceptions by statute:
Children’s hospitals;
Distinct psychiatric and rehabilitation units;
Hospitals outside the 50 states;
Hospitals in states with an approved waiver;
CAHs.

Question 2

What is the DRG operating payment calculation for Prospective portion of Medicare inpatient hospital payment?

Answer 2

MSDRG Operating Payment = DRG weight x ([Labor Amount x Wage Index] x Nonlabor amount)

Question 3

What is the DRG capital payment calculation for Prospective portion of Medicare inpatient hospital payment?

Answer 3

Capital Payment = DRG weight x (Standard amount x Geographical adjustment factor)

Question 4

What three categories of costs are “Reasonable Cost” categories of Medicare inpatient hospital payment?

Answer 4

1. Direct medical education costs
2. Organ acquisition costs
3. Bad debts for copayments and deductibles (reimbursed at 65%)