Technology under Medicare Diagnosis-related Groups Prospective Payment

Medicare prospective payment by diagnosis-related groups (DRGs) has intensified the debate over the use and costs of medical technology. In this study, we examine the financial impact of DRG payment for medicare patients receiving medical intensive care. During a one-year period, payment for 446 Medicare patients receiving medical intensive care at a large teaching hospital was calculated to be +4.7 million below costs, representing an average loss per discharge of +10,567. Patients stayed an average of 21.6 days including an average of 5.0 days in the medical intensive-care unit--23 percent of the total stay. Twenty-eight percent of the MICU patients died during hospitalization. For this group, the average payment per discharge was projected to be +21,651 below the average per discharge cost. We conclude that the results send strong financial messages to hospitals providing medical intensive care to severely ill, elderly patients. Further exploration and research must occur to ensure hospital responses will be consistent with public policy expectations.