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DRG Payment Processing

Question: I'm taking a medical billing class, and they started talking about inpatient DRG payments. If the hospital's charges are $15,000 and the payment that the insurance company makes is only $10,000, is the patient billed for the balance?

Answer: On inpatient claims, hospitals are paid based on diagnosis rather than on actual procedures or the length of stay in the hospital. This is known as DRG (diagnosis related groups) payments.

Although this is the standard way hospitals are paid for inpatient stays, DRGs differ across the board from insurance to insurance. This means that DRG 205 for one insurance may not be the same for another insurance, and the payment rates will be different. Also, one insurance might use DRG 205, whereas another insurance might not have DRG 205. It all depends on insurance and contract.

Because hospitals get paid by DRG, any payment amount that's either higher or lower than the amount of the DRG the insurance is supposed to pay will have to be adjusted in some fashion by the hospital by either adding a dollar amount or subtracting a dollar amount. Extra adjustments might have to be made if there is a deductible amount or any other money that has to be paid by the patient in addition to payments being made by the insurance companies.

One final thing; these days, many hospitals across the country have added DRGs for patient that don't have insurance, so that patients aren't stuck having to pay full account balances as they did in the past.

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