Hospitals contract with Medicare to furnish acute hospital inpatient care and agree to accept predetermined acute inpatient prospective payment system (IPPS) rates as payment in full. The inpatient hospital benefit covers patients for 90 days of care per episode of illness with an additional 60-day lifetime reserve. Illness episodes begin when patients are admitted and end after they have been out of the hospital or Skilled Nursing Facility (SNF) for 60 consecutive days.
The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospitals’ costs, including the patient’s condition and the cost of hospital labor in the hospital’s geographic area.
Discharges are assigned to diagnosis-related groups (DRGs), a classification system that groups similar clinical conditions (diagnoses) and the procedures furnished by the hospital during the stay.The patient’s principal diagnosis and up to 24 secondary diagnoses that may include comorbidities or complications will determine the DRG assignment. Similarly, DRG assignment can be affected by up to 25 procedures furnished during the stay. Other factors that may influence DRG assignment include a patient’s gender, age, or discharge status disposition.