Paying for Hospital Services Operating Payment
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Paying for Hospital Services
Operating Payment
Operating payment = (Relative Weight x ((Labor Related Large Urban Standardized Amount x San Francisco CBSA Wage Index) + (Nonlabor Related National Large Urban Standardized Amount x Cost of Living Adjustment)) x (1 + IME + DSH)). (Kronenfeld, 2011).
The case weight for the kidney transplant is 4.1370 while the Medicare approved cost is $ 150000.
Therefore operating expense will be 4.137 x ((3397.52 x 1.5419) + (1476.09 x 1) x ( 1 + 0.0744 + 0.1413)) based on table of values used in calculations.
= (4.137 x (3399.0619 + 1476.09) x (1.2157))
= 24518.8496
Operating payment therefore = $ 24518. 85
Capital Payment
Capital Costs = ((DRG Relative Weight x Federal Capital Rate x Large Urban Add-On x Geographic Cost Adjustment Factor x COLA) x (1 + IME + DSH)) (Neun & Santerre, 2012).
For the case of kidney transplant with case weight of 4.1370 the capital cost will therefore be = (( 4.1370 x 427.03 x 1.03 x 1.3452 x 1) x (1 + 0.0243 + 0.0631)
= 2447.75525 x 1.0874
= 2661.689
Capital Payment therefore = $ 2661.69
Eligibility Criteria
Operating cost, in this case, will be
Billed charges x operating cost to charge ratio
= 150000 x 0.38
= $ 57000
Capital cost will be
Billed charges x capital cost to charge ratio
= 150000 x 0.04
= $ 6000
The outlier threashold will be
Operating CCR = (operating cost/total costs) (Neun & Santerre, 2012)
= 57000/ (57000+6000)
= 57000/63000
= 0.9048
Operating Outlier Threshold = ((Fixed Loss Threshold x ((Labor related portion x San Francisco CBSA Wage Index) + Non-labor related portion)) x Operating CCR to Total) + Federal Payment with IME and DSH (Tomkins, 2010)
((24485 x ((0.697 x 1.5419) + 0.303)) x 0.9048) + 24518.85)
= $ 55039.85
Capital CCR = (capital cost/total costs)
= 6000/63000
= 0.0952
Capital Outlier Threshold = (Fixed Loss Threshold x Geographic Adj. Factor x Large Urban Add-On x Capital CCR to Total CCR) + Federal Payment with IME and DSH
= (24485 x 1.3452 x 1.03 x 0.0952) + 2661.69
=$ 5891.38
Total operating costs are not greater than the total outlier threshold (McAneny, 2010)
This is = 57000 + 6000 = 63000
And = 55039.85 + 5891.38 = 60931.23
Therefore, the hospital will qualify for Medicare outlier payment.
Total Payment to the Hospital
Operating outlier payment = (operating costs – operating outlier threshold) x marginal cost factor
= (57000 – 55039.85) x 0.8
= $ 1568.12
Capital Outlier Payment = (Capital Costs - Capital Outlier Threshold) x Marginal Cost Factor)
= (6000 – 5891.38) x 0.8
= $ 86.90
Total payment = (57000+6000+1568.12+86.90)
= $ 64655.02
Paying for Physician Services
Medicare Payment for a Participating Physician
Cost Incurred = [(work RVU x work GPCI) + (Practice Expense RVU x Practice Expense GPCI) + (Malpractice RVU x Malpractice GPCI)] x Conversion Factor] (Brennan, Dosoretz & Falit, 2013)
Where RVU is the relative value unit and the GPCI is the geographical cost index
= [(27.45 x 1.092) + (43.05 x 1.743) + (10.32 x 0.543)] x 64.43
= (29.98 + 75.04 + 5.60) x 64.43
= $ 7127.25
Medicare payment for participating physicians is 80%
Therefore in this case the Medicare payment =
0.8 x 7127.25
= $ 5701.80
In this case, the patient is responsible for settling 20% of the approved amount.
Since Medicare covers 80% of the total amount incurred ($5701.80), the patient will pay the remaining amount from the total ($ 7127.25) payment at 20% that constitutes
= $ 1425.45
Medicare Payment for a Non-Participating Physician Electing Assignments
A participating physician takes all the assignments for all Medicare claims and receives full Medicare compensation for the cost incurred (Medicare Contracting Reform, 2008). For non-participating physicians, the allowable amount from Medicare constitutes 95% of the total amount allowed for attending physicians. For a doctor who elects assignments, Medicare only covers 80% of the total amount incurred whereas the physician receives the remaining 20% as deductibles to the client (Tomkins, 2010). The doctor agrees not to charge the patient any amount above the agreeable 20% in deductions.
In this case, for therefore Medicare will pay;
(95/100 x 7127.25) x 80/100
= $ 5416.71
Medicare directly pays 80% to the physician therefore 80% 0f 5416.71
= $ 4333.37
In this instance, therefore, the patient will cover the remaining amount from out of pocket, which is the full Medicare fee schedule less the amount directly paid by Medicare.
= 7127.25 – 4333.37
= $ 2793.88
Medicare Payment for a Non-Participating Physician Not Electing Assignments
For non-participating physicians, the allowable amount for Medicare constitutes 95% of the total amount allowed for attending physicians (Medicare Contracting Reform, 2008). For a doctor who does not select tasks, Medicare therefore, will cover 95% of the total amount incurred whereas the 5% applies in every aspect.
In this case, for therefore the payment will be;
(95/100 x 7127.25)
= $ 6770.89
80% of 6770.89 = 5416.71
Therefore, Medicare will directly pay $ 5416.71
In this case, therefore, the patient will cover the remaining amount from out of pocket, which is the whole Medicare fee schedule less the amount directly paid by Medicare (Neun & Santerre, 2012).
= 7127.25 – 5416.71
= $ 1710.54