2012-S-5Division of State Government Accountability
To determine whether the Department of Health (Department) appropriately and eecvelyimplemented and applied the new APR DRG-based hospital inpaent payment system forMedicaid services when paent deaths occur within one day of admission. The audit covers the
period December 1, 2009 through September 30, 2012.
Eecve December 1, 2009, responding to statutory changes enacted by the Legislature, the
Department implemented a change to the Medicaid reimbursement methodology used to
compensate hospitals for inpaent medical care. The new methodology, based on All PaentRened Diagnosis Related Groups (APR DRG), was implemented to provide a more equitablepayment method for hospital inpaent services and to beer reect the variable costs associatedwith individual paent treatment.
• Since the implementaon of the APR DRG
methodology, Medicaid has paid signicantlymore for certain claims when paent deaths occur within the rst day of admission. For
instance, Medicaidpaid $153,329on a claim with hospital charges totaling $9,685
for a paentwho died within the rst day of admission. The APR DRG-based methodology assigns addionalimportance to the reason for admission and severity of illness in calculang reimbursements.Usually, the more severe the illness, the higher the reimbursement factor. Because paentdeaths can result from more severe medical condions, Medicaid payments for death-relatedone-day admissions can be substanally higher than the hospital’s charges for treang thepaent.• For the 1,833
claims we reviewed,
Medicaid payments averaged 225 percent of the hospitals’submied charges (more than 5 mes the rate for other inpaent claims). Under the APR DRG
methodology, there is no adjustment for a ‘short stay’ except for certain paent transfers
and specialty hospitals. By modifying the APR DRG-basedreimbursement methodology to
reect the lower charges associated with one-day death-related inpaent admissions, weesmate that Medicaid could have saved as much as $31.1 million.
• Formally assess the Department’s implementaon and applicaon of the APR DRG
system, including the inpaent reimbursement methodology, that compensates hospitals for
the cost of care when death occurs within one day of admission.
Use the results of the formal assessment to revise the APR DRG-basedreimbursementmethodology, as warranted.
Other Related Audits/Reports of Interest