Reimbursement Methodologies
Scope
Reimbursement questions test how payment models differ. Under inpatient prospective payment (IPPS), a Medicare claim is grouped into an MS-DRG by principal diagnosis, secondary diagnoses (CC/MCC), procedures, age, sex, and discharge disposition; payment equals the DRG relative weight multiplied by the hospital’s adjusted base rate. Case mix index summarizes the resource intensity of a hospital’s patients and moves with accurate documentation.
Outpatient services are paid under OPPS using Ambulatory Payment Classifications, while physician services follow the Resource-Based Relative Value Scale, where payment reflects physician work, practice expense, and malpractice RVUs, adjusted by geographic practice cost indices and multiplied by a conversion factor. Also know the chargemaster, revenue codes, the UB-04 institutional claim versus the CMS-1500 professional claim, coordination of benefits, copayments and deductibles, capitation, per diem and case rates, and denial management.
Traps
Do not confuse the principal diagnosis with the principal procedure, or the MS-DRG with the Major Diagnostic Category (the MDC is the broad body-system grouping that precedes the DRG). Questions often hide a payment driver in the documentation: a secondary diagnosis only affects payment if it is documented as a CC/MCC, and a procedure only groups when it is captured accurately. Present-on-admission status and hospital-acquired conditions can change payment.
Worked example
DRG relative weight 1.5000, hospital base rate $6,000 → payment = 1.5000 × $6,000 = $9,000, before adjustments for teaching, disproportionate share, or outliers. Rule of thumb: identify the payment system first, then the grouping variable, then the formula.