Instead of paying for each service you receive, a payment amount is predetermined based on your DRG.
What Are Diagnosis-Related Grouping (DRG) Systems?
The exact amount is based on the patients DRG.
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In some cases, the DRG classification also includes the patient’s age, sex, and discharge status.
Its based on different DRGs under theMedicare Severity Long-Term Care Diagnosis-Related Groups system (MS-LTC-DRGs).
How Do DRGs Work?
Every person is different, and two patients with the same condition might need very different types of care.
Adjustments to the DRG base payment are also made forteaching hospitalsandhospitals that treat many uninsured patients.
MS-DRGs are used by Original Medicare, and can also be used by Medicare Advantage plans.
But Medicare Advantage plans also pay hospitals under various incentive programs, including pay-for-performance and shared savings models.
If the hospital spends less than the DRG payment on your treatment, it makes a profit.
If it spends more than the DRG payment treating you, it loses money.
But in most cases, a DRG won’t change the amount that the patient pays in out-of-pocket costs.
For patients with Medicare Advantage, out-of-pocket costs for inpatient care will vary by plan.
What Is Case-Mix Complexity?
Case-mix complexity is used in tandem with DRGs.
The term refers to distinct patient attributes that may affect the cost of care.
To healthcare providers, case-mix complexity refers to the patients condition and the bang out of treatment they need.
To hospital administrators, it indicates the degree of resources needed and how much that will cost.
Insurance regulatorsuse these to determine how much they pay.
What Is the History of the DRG System?
The DRG system was created, and changed how Medicare pays hospitals.
What Is the Impact of DRGs on Health Care?
The DRG payment system encourages hospitals to be more efficient and reduces their incentive to overtreat you.
This has both benefits and drawbacks for patient care.
Challenges
The diagnostic-related grouping system also has its drawbacks.
For patients, this includes:
For hospitals, the reimbursement methodology affects the bottom line.
As a result, many private hospitals channel their resources to higher-profit services.
Still, DRGs remain the structural framework of the Medicare hospital payment system.
Medicare has rules that penalize a hospital in certain circumstances if a patient is readmitted within 30 days.
This is meant to discourage early discharge.
Outpatient Services
Hospitals are often eager to open beds for incoming patients.
Discharging patients sooner rather than laterhelps the hospital make a profitfrom the DRG payment.
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