Acute Care: Acute Care Hospital

One in every five Medicare beneficiaries is hospitalized one or more times each year. There are almost 5,000 inpatient acute-care hospitals nationwide that treat these beneficiaries. Of the approximately $300 billion dollars spent on the Medicare program each year, almost $100 billion is spent on inpatient services¹.

Pathway to DRG payment

Over three quarters of these hospitals (about 3700) are paid under the inpatient prospective payment system (IPPS) in the form of a DRG payment.

• DRG payment is based on the individual patient’s discharge diagnosis (primary and secondary), age, sex and other procedures performed during the hospitalization.
  • The discharge diagnosis is reported with an ICD-9-CM code.
  • The ICD-9-CM codes are cross-walked to an MS-DRG, which corresponds to a single payment amount.
  • DRG payment covers all care required for treatment of the patient during hospitalization.
  • Hospitals can not balance bill patient when DRG payment is lower than the actual cost to provide care.

Acute Care PPS Model²

Coverage of medical supplies and equipment

The DRG payment is all inclusive and includes ostomy products, wound dressings, fecal collectors, Negative Pressure Wound Therapy devices, and all drugs, including enzymatic debriding agents.