Inpatients can defined as the patients who are confined in an institution like a hospital or a nursing home for a temporary basis and where they stay overnight. An Inpatient admission begins when a hospital formally accepts a patient who is to be given health care services while being accommodated at the facility. When it comes to inpatient admissions, it is the responsibility of the physician who is admitting to determine those patients to be admitted in the hospital and ensure that the admitted person is monitored by hospital staff to ensure that there is proper documentation (Scott, 2006).
The Centers for Medicare and Medicaid Services (CMS) has put in place several types of reimbursement methodologies which are used in inpatient services. These payments were introduced with aim of improving quality and at the same time providing additional incentives to spur efforts aimed improving quality in hospitals. The two commonly used reimbursement methods include diagnosis-related groups (DRGs) and per diems. These two are predominantly used by public and private insurers.
DRGs first came into use in 1983 when Medicare used it for the first time. The methodology has been widely adopted by many public and private insurers. DRGs are bundled payments which are predetermined for almost all of the care that a patient accesses in a single stay. However, physician services are not included in this payment. The amount payable is based on the diagnosis of the patient and the procedures that were performed when the patient was hospitalized (CMS, 2003). Each patient is to a DRG depending on the patient’s characteristics and the procedures that were performed when in hospital. The hospital is then paid by Medicare an amount that is prospectively determined which is related to the DGR that was selected. Various factors determine the DRG assigned to a patient and these include the patient’s diagnosis, procedures that were performed, complications that occurred during hospitalization, the demographics of the patient in terms of age and sex and the discharge status, that is whether the patient was alive, died, discharged or was transferred to another hospital for further treatment. From 2007, the number of DRGs was expanded to 745 by Medicare with aim of reflecting the severity of cases within particular DRGs. This resulted in DRGs referred to as Medicare severity DRGs (MS-DRGs). Patients with greater severity may be assigned to a DRG if they exhibit one or more of a list of extensive complications and comorbidities (CCs) or major complications and comorbidities (MCCs). Thus, the MS-DRG is a payment that is fixed and all-inclusive and is intended to cover practically all of the services received during the stay. However, cases that are exceptionally expensive may qualify for outlier payments.
The second payment method used for inpatient services is the Per Diem method. In this case, the per diem rates are predetermined, daily payments which are bundled for majority of the care accessed by an inpatient, but payment for physician services is not included. Just like the DRG system, the hospitals bear the financial risks for the care which they provide. Per diem payments are also made for drugs, devices and supplies, though expensive products may be exempted (Scott, 2006). Also, the services provided by physicians are not part of the per diem payments and hence are separate. Payers use the per diem separately with some using it for all types of services while others have multiple per diems for different services like ICU, maternity and medical surgery. The extent of coverage and reimbursement varies among providers.
Centers for Medicare and Medicaid Services (2003). Changes to the Hospital Inpatient
Prospective Payment Systems. Retrieved from
Scott, k (2006). Coding and reimbursement for hospital Inpatient services. American Health
Management Information Association.