When I teach Medicare regulations to physician advisors, case managers, and utilization review professionals, it is always interesting to see the reactions when I explain how Medicare calculates how much to pay for an inpatient admission. Most are aware of the Medicare Severity Diagnosis-Related Group (DRG) system and the DRG triads and dyads, and know that there is a relative weight assigned to each DRG. Most also know about the varying Medicare value-based programs, such as the Hospital Readmission Reduction Program and the Hospital-Acquired Condition Penalty Program, and know that they somehow affect how much a hospital is paid. But beyond that, for most it was a black hole. A patient gets admitted, the care provided, the chart coded, and the claim submitted, then at some point a payment was received. Jaws drop when I show a screenshot of the Inpatient Pricer and explain the effect of the wage index, the operating and capital payments, the additions for medical education, disproportionate share, and uncompensated care, and the adjustments for value-based purchasing, readmission reduction, and hospital-acquired conditions.
Up until now, I have been calling the Inpatient Pricer my “hidden gem.” Although I am sure that there is someone in every hospital who has access to the Pricer and to claims data to see how much the hospital is paid for an admission with a specific DRG, most of the people with whom I interact do not have that access. That meant I was able to provide valuable information that others could not.
Why was it so difficult to gain access to the Pricer? Just as healthcare continues to rely on fax machines, to the amusement of all other industries, the Pricer had continued to rely on software that had to be downloaded to one’s computer. And in today’s world of cybercrime, with malicious software and prevalent phishing, downloading such software and running executable files is ill-advised. I, though, relied on my rudimentary computer knowledge, gleaned from my high-school days of programming with keypunch cards using BASIC, took a chance, and figured out how to safely load and run the program.
As a result, I was able to calculate the payment for any DRG at any hospital. I could compare the payment for two hospitals in the same city, two hospitals in the same health system but in different cities, and most importantly, now that the Centers for Medicare & Medicaid Services (CMS) will be eliminating the inpatient-only list, the difference between a surgery performed as inpatient and as outpatient at the same hospital.
But my value to others is about to diminish, as CMS has just introduced an online Pricer not only for inpatient claims, but also for Inpatient Rehabilitation Facility (IRF) admissions, and soon for Skilled Nursing Facilities (SNFs), Long-Term Acute Care, Inpatient Psychiatry, Home Health, Hospice, and End-Stage Renal Disease. The page to find all these is webpricer.cms.gov.
To use it, one only needs the hospital’s CMS provider number and the DRG. The form does require the dates of admission and discharge and the charges, but the values do not influence the calculation unless the case is an outlier, so I tend to use Oct. 1, 2020 to Oct. 3, 2020 and a charge amount that seems reasonable, such as $30,000 for a joint replacement. The output will provide you not only the total payment, but a breakdown of the various components, including the additions or deductions for the factors noted above.
But before you proceed, there are caveats. First, as CMS notes in its disclaimer, this tool is an estimator, and may not exactly match the payment amount determined by the Medicare claims processing system. Second, it is often a dangerous game trying to predict a DRG without access to a coder or an actual claim. For some, such as total joint replacement and its DRG dyad, it is relatively easy, since the majority of inpatients fall into DRG 470 because they do not have a major complication or comorbidity to warrant a move to DRG 469. But for most other surgeries and most medical admissions, the triad makes it difficult to know which DRG to assign.
Finally, when comparing output from the fiscal year 2021 online Pricer and the downloaded version for the same period, the final payment amounts differed for the same DRGs for several teaching hospitals, varying by $500 to $1,000. For the same DRGs, for a local community hospital, the payments matched. That amount is not going to make or break a hospital, and as noted above, this is an estimation tool, but it is important to understand the limitations. So go online and start exploring. The data may provide insights to allow you to better understand the intricacies of hospital payment.
Ronald Hirsch, MD, FACP, CHCQM-PHYADV, CHRI, FABQAURP is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic.