Medicare overhaul of hospital payments: # DRG"s increase, cut in federal wage index

**NRSKarenRN, BSN, RN** · Aug 26, 2007

pennsylvania hospitals are bracing for an overhaul in the way the federal government pays for inpatient care, the biggest change since medicare's reimbursement formula was developed in 1984.

effective in october, the center for medicare and medicaid services will revise the payment schedule for diagnostic related groups, with the number of drgs to rise to 745 from 538, to better reflect the severity of the patient's condition; sicker patients cost more to treat, which will be better reflected in the new schedule, reported the business times.

the hospital & healthsystem association of pennsylvania predicts the rate revision will cost pa. hospitals an estimated $30 million in 2008, while a cut in the federal wage index, which is used to compute payments to hospitals, will cost another $75 million next year, the business times noted. the changes arose in part from complaints about specialty hospitals cherry-picking the healthiest patients, who cost less to treat, while the rate changes will be phased in, with a 50-50 blend of rates used in 2008 and full implementation of the new schedule in 2009, the business times added.

pittsburgh business times, august 20, 2007

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