What is the process for reimbursement of hospital admission?

Hospital Admission Reimbursement Process

The reimbursement process for hospital admissions primarily operates through diagnosis-related groups (DRGs), with Medicare and other payers using specific codes to determine payment amounts based on diagnosis, complications, and comorbidities. 1

Medicare Reimbursement Framework

• Medicare reimbursement for hospital admissions is primarily based on a prospective payment system using diagnosis-related groups (DRGs), which replaced retrospective payments to control hospital costs 1
• Each inpatient admission is classified into one of several hundred DRGs based on the patient's diagnosis, complications, and comorbidities, with the Centers for Medicare & Medicaid Services (CMS) assigning weights to determine reimbursement amounts 1
• For stroke patients receiving thrombolytic therapy, Medicare implemented specialized DRG codes (MS-DRG 61,62, and 63) that nearly doubled the payment compared to non-thrombolytic stroke care, reflecting the increased professional and monitoring services required 2
• Documentation must clearly demonstrate medical necessity for inpatient level of care, including severity of illness and intensity of services required 3

Special Reimbursement Scenarios

• In "drip and ship" scenarios (where treatment begins at one facility before transfer to another), Medicare policy has historically limited enhanced payments, with the initial hospital paid on an outpatient basis and the receiving hospital paid at traditional rates 2
• To address this gap, CMS established diagnostic code V45.88 for patients who received tPA at a different facility within 24 hours before admission, allowing better data collection to potentially modify reimbursement policies 2
• For Hospital at Home programs, reimbursement options vary significantly, with fee-for-service Medicare without home health showing the lowest reimbursement potential ($964-$1604 per episode) compared to ACO models with home health ($4519-$4718) 4

Medicaid and Private Payer Reimbursement

• Medicaid is a shared financial responsibility between state and federal governments, with reimbursement policies varying by state 2
• Some state Medicaid programs have implemented specific policies to address reimbursement gaps - for example, New York Medicaid provides transfer fees to spoke hospitals that begin tPA treatment before transferring patients to stroke centers 2
• Private sector health plans increasingly provide reimbursement for specialized services, with a 2005 survey showing 57% of respondents receiving reimbursement from private payers for telemedicine services, up from just 4% in 2003 2

Hospital Readmissions and Financial Penalties

• The Hospital Readmissions Reduction Program (HRRP) penalizes hospitals with higher-than-expected 30-day readmission rates, with penalties up to 3% of total Medicare payments 2
• Initially targeting heart failure, acute myocardial infarction, and pneumonia, the program has expanded to include chronic obstructive pulmonary disease, total hip/knee arthroplasty, and coronary artery bypass graft 2
• Approximately 79% of Medicare-participating hospitals have been penalized under this program, significantly impacting hospital reimbursement 2

Cost Variations and Financial Implications

• Hospital costs vary significantly by treatment type - for example, operative treatment for adhesive small bowel obstruction averages €16,305 compared to €2,277 for non-operative treatment 5
• Length of stay significantly impacts reimbursement, with ventilator-dependent patients in pediatric post-acute rehabilitation having the highest total admission reimbursement due to longer stays (mean 57.78 days) 6
• Private payers typically have significantly higher mean daily reimbursement rates compared to public payers 6

Common Pitfalls and Challenges

• Simply increasing resources or hospital activity doesn't necessarily solve waiting list problems, as demand can be partly induced by supply 7
• Hospitals with large numbers of uninsured patients face disproportionate financial burdens, with some receiving Disproportionate Share Hospital payments that are often inadequate for hospitals with large "safety net" populations 2
• Documentation gaps can lead to denied reimbursement - hospitals must ensure clinical stability documentation for 24-48 hours before discharge and provide appropriate follow-up appointment information 3
• Patients have the right to appeal discharge decisions when they feel medically unready, with appeals handled by Quality Improvement Organizations (QIOs) 3

Payment-for-Quality Considerations

• Payment-for-quality programs are increasingly influencing hospital reimbursement, designed to align financial incentives with high-quality care delivery 2
• Quality measures should be risk-adjusted, standardized, evidence-based, and ideally based on clinical data rather than administrative data 2
• Successful implementation of specialized care systems (like cardiac resuscitation) may require increased funding through shared reimbursement models that include payments to referring hospitals, emergency medical services, and receiving facilities 2