Performance Improvement 2009. How Might Refinements to Cost-to-Charge Ratios Improve the Payment Accuracy of Two Sets of Relative Payment Weights?


The study sought to improve the payment accuracy of the ambulatory payment classification weights used in the hospital outpatient prospective payment system and the Medicare severity adjusted diagnosis related groups weights used in the hospital Inpatient prospective payment system. In order to improve them, researchers analyzed the cost estimates used in the computation of relative resource weights. They analyzed how to better use existing cost report and claims data, making changes to the Medicare cost report and MedPAR data file, and estimating statistical adjustments to address aggregation bias in cost-to-charge ratios.

Key results included corrections of providers’ misclassification of nonstandard cost centers on the Medicare cost report and expansions and revisions of the detailed revenue code crosswalk used to map claims charges to provider-specific cost report cost-to-charge ratios. Researchers created new outpatient cost centers for services not previously recognized in the cost center aggregation tables. Statistical adjustments were estimated for potential use in cost areas such as medical devices, cardiac catheterization, computed tomography (CT) and magnetic resonance imaging (MRI) scanning, radiology, nuclear medicine, and intravenous solutions.

Report Title: Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights

Agency Sponsor: CMS-ORDI, Office of Research, Development, and Information
Federal Contact: Philip Cotterill, 410-786-6598
Performer: Research Triangle Institute
PIC ID: 8955

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