Medicare: CMS's Proposed Approach to Set Hospital Inpatient Payment Appears Promising

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A letter report issued by the Government Accountability Office with an abstract that begins "Under Medicare's inpatient prospective payment system (IPPS), hospitals generally receive fixed payments for hospital stays based on diagnosis-related groups (DRG), a system that classifies stays by patient diagnosis and procedures. CMS is required to at least annually update DRG payments to address changes in the cost of inpatient care. CMS uses charge-based weights to update these payments. Cost-based weights are used to set payments in the outpatient prospective payment system (OPPS). The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 required GAO to study IPPS ... continued below

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United States. Government Accountability Office. July 28, 2006.

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Description

A letter report issued by the Government Accountability Office with an abstract that begins "Under Medicare's inpatient prospective payment system (IPPS), hospitals generally receive fixed payments for hospital stays based on diagnosis-related groups (DRG), a system that classifies stays by patient diagnosis and procedures. CMS is required to at least annually update DRG payments to address changes in the cost of inpatient care. CMS uses charge-based weights to update these payments. Cost-based weights are used to set payments in the outpatient prospective payment system (OPPS). The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 required GAO to study IPPS payments in relation to costs. During the course of GAO's work, CMS proposed a new cost-based method for determining DRG weights. This report (1) examines the applicability of CMS's cost-based method--used for the OPPS--to weight DRGs in the IPPS and (2) evaluates whether CMS's proposed approach is an improvement over its OPPS method for setting cost-based weights. Using fiscal year 2002 cost reports and claims from 2001, 2002, and 2003 to examine the applicability of the OPPS method, GAO estimated costs for 1,025 IPPS hospitals whose Medicare cost reports most consistently reflected the total charges and number of Medicare stays that these hospitals reported on their claims. To evaluate CMS's proposed approach, GAO analyzed fiscal year 2003 cost reports and 2003 claims for 3,558 hospitals."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • July 28, 2006

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  • June 12, 2014, 7:50 p.m.

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United States. Government Accountability Office. Medicare: CMS's Proposed Approach to Set Hospital Inpatient Payment Appears Promising, report, July 28, 2006; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc298440/: accessed September 21, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.