Identify and discuss Medicares Prospective Payment System Case Assignment, Session Long Project
Calculate Medicare payments for hospital services Case Assignment
Calculate and discuss the significance of outliers Case Assignment
Discuss physician reimbursement under Medicare and distinguish between physicians Case Assignment, Threaded Discussion
Apply Relative Value Units in calculating physician reimbursement Case Assignment
Discuss the current state and financial health of the Medicare Session Long Project
Diagnostic Related Groups are 495 distinct categories or groupings that serve as the foundation for Medicares prospective payment system. Below are examples of Diagnostic-Related Groups adapted from the Health Care Finance Administration:
DRG Description Case Weight Outlier
001 Craniotomy Age>17 Years, Except for Trauma 3.0932 32
037 Orbital procedures 0.8821 26
072 Nasal Trauma 0.6419 26
115 Permanent Cardiac Pacemaker 3.5513 33
191 Pancreas, Liver, Shunt Procedure 4.2189 36
302 Kidney Transplant 4.137 35
418 Post-operative infections 0.9777 29
441 Hand Procedure/Surgery 0.8785 25
488 HIV Extensive O.R. Procedure 4.2177 37
Generally speaking, Medicares payment to hospitals may be split into two categories:
1. Prospective payment
2. Physician payment
PROSPECTIVE PAYMENT: The Prospective category involves three elements:
OPERATING PAYMENT: The operating payment is a major part of Medicares prospective payment; however, if the patients condition requires additional services or longer stay in the hospital, Medicare makes what are called outlier payments. These payments may be more than the operating and capital payments. The elements of the operating payment are as follow:
CAPITAL PAYMENT: Beginning in 1992, Medicare began paying hospitals for their capital costs associated with care and treatment of a patient, on a prospective basis. The elements of the Capital Payment are as follow:
OUTLIER PAYMENT: Outlier payments are additional payments made for patients who use an extraordinary or unusually large amount of resources. The background page has a link to the Medicare site containing information on the process and formula for calculating total payments including outliers.
How are physician rates calculated?
There are Medicare payment rates for 7,000 current procedural terminology (CPT) codes. The specific values vary by region. The payment rates are the product of three relative values and geographic cost indexes and a conversion factor.
Work RVU Represents physician time, skill level, stress and other related factors;
Practice expense RVU Represents non-physician costs, excluding malpractice costs;
Malpractice RVU Represents the cost of malpractice insurance.
The following table should help you better understand how rates are calculated:
Categories RVU Geographic Cost Index Product Conversion Factor
Work 27.36 1.089 29.80 –
Practice Expense 33.59 1.473 49.48 –
Malpractice 6.82 0.646 4.41 –
Total – – 83.69 69.87
The product values are added up and multiplied by the conversion factor. Using the above figures, the payment rate would be $5,847.42.
Now that we know the Medicare Approved Rate;
How are Physicians Reimbursed?
The following table should help you better understand the distinction made between physicians:
Participating Physicians Accept assignment on each and every case Bill Medicare and the patient 100% of the Medicare approved fee for a procedure. Receive payment from Medicare equal to 80% of the Medicare approved fee, and patient pays 20% of the approved fee.
Non-participating Physicians who accept assignment on a case-by-case basis Bill Medicare and the patient 95% of the Medicare approved fee for a procedure. Receive payment from Medicare equal to 80% of the Medicare approved fee for non-participating physicians (95%), and patient pays 20% of the approved fee.
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