On January 2, AHCA released the final Diagnosis Related Group (DRG) Conversion Implementation Plan.  Pursuant to s. 409.905. F.S., AHCA was required to develop a plan to convert Medicaid inpatient hospital rates from the existing cost-based per diem based system to a DRG model.   The DRG model is a prospective payment system that classifies inpatient hospital stays and rates based on a patient’s diagnosis and other relevant factors.  Payment rates are assigned based on the average amount of resources required to treat patients in a particular DRG.  In regard to how the counties reimburse the state for the shares of Medicaid inpatient hospital costs defined in s. 409.915, F.S., the report includes the following discussion and recommendation:            

7.15.1 County Billing Rate - Discussion

Under s. 409.915, F.S., the Agency currently relies on contributions from the counties for a portion of the funding for hospital inpatient stays in excess of 10 days. The amount paid by the counties is 35% of the State’s share of cost of inpatient hospitalization in excess of 10 days. Under the new DRG per discharge payment model, a new method will need to be identified for determining the counties’ obligation under this program.

7.15.2 County Billing Rate - Recommendation

We recommend the portion of payment defined as the responsibility of the county be calculated on a claim-by-claim basis. The county’s portion can be calculated by dividing the number of days for which the county is responsible (any days after day 10, capped at day 45 for adults) by the total covered days on the claim and multiplying that percentage times the claim DRG payment (payment including outliers and excluding supplemental add-on payments from IGT funds), and multiplying this result by 35%. The IGT portion of total claim payment is excluded because counties are not responsible for funding those payments (or in some cases already provided the funds for those payments). The county billing rate only relates to the county’s portion of claim payment from general revenue and PMATF funds.

AHCA will hold the next DRG Inpatient Payment Review meeting on January 8, 2013 at 9:00am.  The complete DRG Conversion Implementation Plan, as well as call-in information for the upcoming meeting, is available at: http://ahca.myflorida.com/medicaid/cost_reim/index.shtml.  An example county billing calculation under the proposed model can be found on page 70 of the document.  FAC staff will continue to monitor the DRG conversion process and will provide additional analysis of the county billing rate recommendations as discussions continue. 

For more information or questions, please contact FAC Health & Humans Services Advocate Susan Harbin.