What classification system is used for inpatient prospective payment?

The classification system used for inpatient prospective payment is Diagnosis-Related Groups (DRGs). The DRG system categorizes hospital cases into groups that are expected to have similar hospital resource use. Under this model, Medicare and other insurers reimburse hospitals based on the patient’s specific diagnosis at the time of admission.

The DRG system simplifies billing and allows for a fixed payment, which encourages hospitals to be efficient in their resource use and helps to control healthcare costs. It integrates patient classification data for services rendered, taking into account the severity of illness, treatment performed, and the length of stay. This system is critical in understanding how inpatient services are funded and how hospitals anticipate and manage financial outcomes based on patient demographics and conditions.

Understanding the distinctions between classification systems is important. For instance, while AP-DRGs are a form of DRGs with adaptations used in some places, they are not the foundational system itself. RBRVS (Resource-Based Relative Value Scale) and CPT (Current Procedural Terminology) primarily pertain to physician services and outpatient care, not the inpatient prospective payment model. Thus, recognizing that DRGs is the fundamental classification for inpatient settings is essential for effective reimbursement practices in healthcare.