From the Guidelines
Medicare reimbursement to hospitals is primarily based on criteria met rather than hospital size. The current guideline for Medicare reimbursement is centered around the Inpatient Prospective Payment System (IPPS), which pays hospitals a predetermined rate for each patient admission based on the diagnosis-related group (DRG) that categorizes patients with similar clinical conditions requiring similar resources 1. This system adjusts payment rates for factors like geographic location, teaching status, and treating a high percentage of low-income patients.
Some key points to consider in the Medicare reimbursement process include:
- Critical Access Hospitals (CAHs), which are small rural hospitals meeting specific criteria, are reimbursed differently—they receive cost-based payments (101% of reasonable costs) rather than DRG-based payments.
- Medicare uses quality-based programs like the Hospital Value-Based Purchasing Program, which adjusts payments based on performance metrics including patient experience, clinical outcomes, and efficiency.
- The Hospital Readmissions Reduction Program (HRRP) also plays a role in reimbursement, penalizing hospitals with higher-than-expected 30-day all-cause Medicare fee-for-service (FFS) readmissions for certain conditions, as determined by a CMS claims-based risk standardization algorithm 1.
- While some payment adjustments consider hospital characteristics, the fundamental structure is based on meeting specific clinical and quality criteria rather than simply the size of the facility.
The HRRP has been shown to change the landscape of hospital readmissions and reimbursement within the United States, with 79% of Medicare-participating hospitals being penalized, resulting in millions of dollars in savings for Medicare 1. However, it's worth noting that hospitals that start with lower readmission rates may continue to face penalties due to the overall improvement in readmission rates across the hospital community 1.
From the Research
Medicare Reimbursement Guidelines
The current guideline for Medicare reimbursement to hospitals is based on several factors, including:
- The Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals 2, 3
- The prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) 2, 3
- Quality reporting requirements for specific Medicare providers, such as acute care hospitals, PPS-exempt cancer hospitals, and LTCHs 2, 3
- The Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program 2, 3
Hospital Size and Reimbursement
There is no direct evidence to suggest that Medicare reimbursement is based solely on hospital size. However, the IPPS takes into account the operating and capital-related costs of acute care hospitals, which may vary depending on the size of the hospital 2, 3.
Criteria for Reimbursement
The criteria for Medicare reimbursement to hospitals include:
- Diagnosis-Related Groups (DRGs), which are categories of patient conditions that demonstrate similar levels of hospital resources required to treat the conditions 4
- Quality reporting requirements, such as the Hospital VBP Program, the Hospital Readmissions Reduction Program, and the HAC Reduction Program 2, 3
- Compliance with Medicare regulations and guidelines, such as those related to electronic health records (EHRs) and cost reporting 2, 3
Note: The study 5 is not relevant to the topic of Medicare reimbursement to hospitals.