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Welcome back, everyone.
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This school responsibility
is an important aspect
of organizational management.
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Understanding reimbursement
starts with learning
about diagnosis-related groups.
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A diagnosis-related group or a DRG
is a patient classification system
that standardizes
prospective payments to a hospital
and encourages
cost containment initiatives.
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Originally, hospitals would charge
individually for each service and product
used during a patient's length of stay.
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As healthcare cost went up,
the government sought a way
to control cost
while still encouraging hospitals
to provide care more efficiently.
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Starting in the 1980s,
DRG has changed
how Medicare pays hospitals.
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Now Medicare pays a single amount
for your hospitalization
according to your DRG
which is based on your age,
gender, diagnosis
and the surgical procedures involved.
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Briefly, let's discuss
how DRG payments are calculated.
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Medicare starts by calculating
the average cost of the resources necessary
to treat Medicare patients
in a particular DRG.
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That base rate isn't adjusted
based on a variety of factors
including the wage index
for that given area.
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There may also be adjustments
to the DRG based payment
if the hospital treats a large number
of uninsured patients
or if it's a teaching hospital.
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Now baseline DRG costs
are recalculated annually
and that information
is released to hospitals,
insurers, and other health providers
through the Centers for Medicare
and Medicaid Services.
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Let's consider this example.
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Mr. Jones and Mr. Smith
were both admitted to the same hospital
for treatment of pneumonia.
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Mr. Jones was treated
and released in three days.
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Mr Smith's hospitalization
lasted nine days.
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Since Mr. Jones and Mr. Smith
had the exact same diagnosis,
they have the same DRG.
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Based on that DRG,
Medicare pays the hospital
the same amount for Mr. Jones
as it does for Mr. Smith,
even though the hospital spent more money
providing nine days of care to Mr. Smith
than providing three days of care
to Mr. Jones.
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The DRG system of payment
encourages hospitals
to become more efficient
in treating patients
and takes away the incentive
for hospitals to overtreat patients.
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However, hospitals became eager
to discharge patients as soon as possible
and are sometimes accused
of discharging patients home
before they're healthy enough
to go home safely.
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To discourage early discharge,
Medicare house rules in place
that penalize a hospital if a patient
is readmitted with the same diagnosis
within 30 days.
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In some DRGs, the hospital has
to share part of the DRG payment
with the rehab facility
or the home healthcare provider
if it discharges a patient
to an inpatient rehab facility
or to home health support.
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DRGs are by far the most important
cost control and quality improvement tool
that governments
and private payers have implemented.
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So when thinking of everything
that we've discussed today,
I'd like for you to consider this question.
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How does Medicare
discourage early discharge?
Medicare has rules in place
that penalize a hospital
if a patient is readmitted
with the same diagnosis
within 30 days.
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I hope you enjoyed today's video
on diagnosis-related groups.
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Thanks so much for watching.