Have you ever wondered how hospitals get paid by Medicare? The New York Times has an excellent and simple explanation of this highly complicated process. It’s simple really.
First the hospital labor component is adjusted for geographic location and then added to the capital depreciation expenditures adjusted for geographic location and then a medical severity adjusted diagnosis related group multiplier is added (MS-DRG).
Once this adjusted payment rate is calculated, the hospital is given a bonus to cover the costs incurred if they are a teaching hospital, through the indirect medical education payment. Added to that is the disproportionate share payment for hospitals that see a lot of uninsured or Medicaid patients (strange that Medicare subsidizes Medicaid, isn’t it?) If you have a patient that is extremely sick or spends mulitple extra days in the hospital, they may get an extra outlier payment. Read more »
*This blog post was originally published at The Happy Hospitalist*