Billing for Hospitals 

>> How Hospitals Bill Medicare <<

Step 1: How hospitals are paid?

Medicare payments for hospital admissions are far more complicated than physicians payments (RVUs). Different factors affect the amount paid do different hospitals, for example:

  • Geographical location
  • Average regional wages
  • Uninsured burden (percent of uninsured patients treated at the facility)
  • GME programs (having residency programs qualify for additional payments)

The system or the plan that Medicare uses to adjust payments for hospitals is called "Inpatient Prospective Payment System (IPPS)".

According to IPPS, hospitals are paid per discharge. Whatever workup or diagnostic burden the hospital had, the payment will be almost the same (with some exceptions).

For each discharged patient, a primary diagnosis and secondary diagnoses are sent to Medicare.

Primary diagnoses are grouped in 800 "Diagnosis Related Groups (DRG)". Each DRG qualifies for a certain sum of money as shown in the table below. Part of the money is targeted to cover the costs of inpatient stay and part of it to cover the capital expenses (expenses to maintain the hospital in a good shape).

Step 2: Examples of payments for different DRG

Again, DRGs are broad-line diagnoses that group different ICD codes. Since patient's medical condition can be simple or complicated, DRGs are classified according to the presence or absence of comorbidities and complications as follow:

  • DRG without comorbidities "CC" or complications "MCC" -> qualifies for the lowest set of money for the diagnosis.
  • DRG with comorbidities "CC" -> gets more money for presence of other medical conditions during same admission.
  • DRG with major complications "MCC" -> gets the highest amount of money allocated to this diagnosis given the presence of complications, as patients with large infarction who developed midline shift or hemorrhagic transformation.

The table below shows the average payments for each neurological condition. Remember that physician reimbursements are separate from hospital reimbursement.

[table id=5 /]