Underpayment on a Contracted Case Rate
A hospital bills a commercial payer for an inpatient stay under a contracted case rate of $14,200 for DRG-type medical admissions, plus a separate per-diem carve-out for days beyond a 5-day length-of-stay threshold at $1,100/day. The patient stayed 8 days. The payer's remittance shows a single line paid at $14,200 with no per-diem lines, and a remark code indicating 'payment per contract.' The hospital's contract also includes a 2% prompt-pay discount if paid within 30 days; the payer paid on day 41. The hospital's chargemaster total for the stay was $61,000. The business office analyst is asked whether to write this off as a contractual adjustment or pursue it.
1. Is the $14,200 payment correct? Show the expected reimbursement and identify any underpayment.
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Expected reimbursement under the contract terms:
- Base case rate: $14,200
- Days beyond the 5-day threshold: 8 − 5 = 3 days × $1,100 = $3,300
- Expected total: $17,500
- Paid: $14,200
- Underpayment: $3,300 (the per-diem carve-out was not paid)
The chargemaster total ($61,000) is irrelevant to the expected payment - under a case rate, charges do not drive reimbursement. The analyst should not compare paid-to-charges; the correct comparison is paid-to-contract terms.
2. What should the analyst do about the per-diem and the prompt-pay discount?
Read the worked answer
Per-diem: The payer's remark 'payment per contract' does not override the contract's LOS carve-out. The analyst should:
- Pull the contract language and the LOS calculation (admission and discharge dates, whether the threshold is counted in midnights or days).
- Verify the 8-day stay against the contract's definition - if the threshold is 'days beyond 5,' 3 days are owed; if it is 'after day 5,' confirm the count.
- Submit a reconsideration/underpayment appeal with the contract excerpt, the LOS calculation, and the remittance, requesting the $3,300.
Prompt-pay: The 2% discount applies only if paid within 30 days. The payer paid on day 41, so the discount should not have been taken. Check whether the payer actually deducted 2% (2% of $14,200 = $284). If it did, that is a second underpayment to recover. If it did not, no action - but the analyst should confirm rather than assume.
Do not write off as contractual adjustment until the contract terms have been reconciled line by line.