Paying For Services

Paying For Services

Mrs. Smith is a 70-year-old hospitalized for a Kidney Transplant procedure. General Hospital is a large urban hospital in San Francisco that incurred $150,000 in Medicare approved charges in treating Mrs. Smith. Use the information provided in this module as well as the Hospital Payments Example, which can be found in the Module 4 Presentation section, to answer the following questions. Include all formulas and calculations in your paper.
DRG Description Case Weight
115 Permanent Cardiac Pacemaker 3.5513
302 Kidney Transplant 4.1370
441 Hand Procedure/Surgery 0.8785
Answer the following questions for Kidney Transplant only:
1.What is the operating payment to be paid to the hospital?
2.What is the capital payment to be paid to the hospital?
3.Will the hospital be eligible for the Medicare outlier payment?
4.What is the total payment to the hospital?

Info Below to calculate:

The following example simulates the outlier payment for a case at a generic hospital in the San Francisco, California CBSA, which is a large urban area. The patient was discharged on or after October 1, 2006 and the hospital incurred Medicare approved charges of $200,000. The DRG assigned to this example was 498 (Spinal Fusion Posterior). The DRG 498 relative weight is 2.9896. The hospital is 100% Federal for capital payment purposes.

Table of Operating Values Used in Calculation Table of Capital Values Used in Calculation
DRG 498 Relative Weight: 2.9896 DRG 498 Relative Weight: 2.9896
Labor-related $3,397.52 Federal Capital Rate $427.03
Nonlabor-related $1,476.97 Large Urban Add on 1.03
San Francisco CBSA Wage Index 1.5419 San Francisco CBSA GAF 1.3452
Cost of Living Adjustment (COLA) 1 Cost of Living Adjustment 1
IME Operating Adjustment Factor 0.0744 IME Operating Adjustment Factor 0.0243
DSH Operating Adjustment Factor 0.1413 DSH Operating Adjustment Factor 0.0631
Labor Related Portion 0.697 Capital Cost to Charge Ratio 0.04
Nonlabor Related Portion 0.303
Operating Cost to Charge Ratio 0.38

Other Factors
Billed Covered Charges $200,000
Fixed Loss Outlier Threshold $24,485
Marginal Cost Factor 0.8

Step 1: Determine Federal Operating Payment with IME and DSH:

Federal Rate for Operating Costs = (DRG Relative Weight x ((Labor Related Large Urban Standardized Amount x San Francisco CBSA Wage Index) + (Nonlabor Related National Large Urban Standardized Amount x Cost of Living Adjustment)) x (1 + IME + DSH))

Federal Operating Payment With IME and DSH = $24,407.58

Step 2: Determine Federal Capital Payment with IME and DSH:

Federal Rate for Capital Costs = ((DRG Relative Weight x Federal Capital Rate x Large Urban Add-On x Geographic Cost Adjustment Factor x COLA) x (1 + IME + DSH))

Federal Capital Payment With IME and DSH = $1,923.47

Step 3: Determine Operating and Capital Costs:

Operating Costs = Billed Charges x Operating Cost to Charge Ratio

Operating Costs = $76,000

Capital Costs = Billed Charges x Capital Cost to Charge Ratio

Capital Costs = $8,000

Step 4: Determine Operating and Capital Outlier Threshold

A. Operating CCR to Total CCR = Operating CCR / (Operating CCR + Capital CCR)

Operating CCR to Total CCR = 0.9048

B. Capital CCR to Total CCR = Capital CCR / (Operating CCR + Capital CCR)

Capital CCR to Total CCR = 0.0952

"C. Operating Outlier Threshold = ((Fixed Loss Threshold x ((Labor related portion x San Francisco CBSA Wage Index) + Nonlabor related portion)) x Operating CCR to Total) + Federal Payment with IME and DSH:
"

Operating Outlier Threshold = $54,929.28

"D. Capital Outlier Threshold = (Fixed Loss Threshold x Geographic Adj. Factor x Large Urban Add-On x Capital CCR to Total CCR) + Federal Payment with IME and DSH
"

Capital Outlier Threshold = $5,153.16

Step 5: Determine Operating and Capital Outlier Payment Amount

A. Determine if Total Costs are Greater than Combined Threshold = (if (operating costs+ capital costs) > (operating threshold + capital threshold))

Determine if Total Costs are Greater than Combined Threshold TRUE, Continue With The Next Step

B. Operating Outlier Payment = (Operating Costs – Operating Outlier Threshold) x Marginal Cost Factor

Operating Outlier Payment = $16,856.58

C. Capital Outlier Payment = (Capital Costs – Capital Outlier Threshold) x Marginal Cost Factor
Note: If Capital Outlier Payment Amount is Negative, we default this amount to 0

Capital Outlier Payment = $2,277.47

 
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