Short-term acute-care hospitals are reimbursed under the inpatient prospective payment system (IPPS) within the Medicare program. The rates are prospectively set based primarily on the diagnosis each year for implementation October 1.
Each discharge is assigned to one diagnosis-related group (DRG) that is associated with a weight that reflects the average amount of resources needed to serve such patients. That weight is multiplied by the standardized amount (set dollar amount) that has been adjusted for differences in labor costs in the area to yield a base payment rate.
The payment may also include additional payments for excessively costly cases (outliers), indirect medical education (IME) costs, disproportionate share hospital (DSH) costs associated with services provided to low-income patients, and new technology costs. The payments may also be reduced for patients transferred to certain providers prior to the patient reaching the average length of stay for that DRG as well as hospital-acquired conditions. This calculation is made separately for both operating and capital costs with slightly different methodologies, but results in one total payment to hospitals.
FY17 IPPS rule
FY16 IPPS rule
Members only summary: Premier detailed summary of the fiscal year (FY) 2016 final rule for the inpatient prospective payment system (PPS)
Premier Advisor Live webinar on the fiscal year (FY) 2016 final rule for the inpatient prospective payment system (PPS)
Members only summary: Premier detailed summary of proposed FY 2016 inpatient/LTCH PPS rule
Members only excel files: Premier Excel comparison file for proposed FY 2016 inpatient/LTCH PPS rule
- Advisor Live webinar presentation and audio recording covering the inpatient PPS rule
- Premier’s Flash Update on FY 2016 inpatient PPS/LTCH rule
FY15 IPPS rule
Members only summary: Premier Summary of final FY 2015 inpatient/LTCH PPS rule
Members only excel file: Excel file comparing the final FY 2015 inpatient PPS rates and weights with the 2014 rates and weights
Members only summary: Premier Summary of final FY 2015 inpatient/LTCH PPS proposed rule
FY14 IPPS rule
FY13 IPPS rule
FY12 IPPS Rule
FY11 IPPS Rule
Medicare value-based purchasing (VBP)
The Affordable Care Act requires a Medicare hospital VBP program to be established beginning in FY13, at which time a portion of hospitals’ payment will be linked to performance on measures related to common and high-cost conditions. The value-based incentive program places at stake 1% of hospitals’ Medicare inpatient prospective payment system payments in FY13 and gradually increases this amount to 2% by FY17. The Centers for Medicare & Medicaid Services (CMS) released a final regulation implementing Medicare hospital VBP program in May 2011. Updates and changes to the program will primarily be made through the yearly Medicare inpatient prospective payment system regulatory cycle.