§ 1163.122. Determination of DRG relative values.
(a) The relative values for the forthcoming fiscal year are based on the following:
(1) The Department’s most recent paid claims data available for at least a 2-year period. For example, the relative values to be used for Fiscal Year 1985-86 are based on paid claims data from the period July 1, 1982—December 21, 1984. The Department establishes a data base of claims appropriate for payment under the DRG payment system by removing claims:
(i) For distinct part psychiatric units excluded from the DRG payment system.
(ii) For distinct part drug and alcohol treatment units excluded from the DRG payment system.
(iii) For services previously paid as inpatient hospital services but which are no longer paid as inpatient claims.
(iv) For those that group into DRGs 469 and 470.
(v) For those indicating that Medicare made part of the payment.
(vi) For those involving patient transfers, except for transfers occurring in DRGs 385 and 456.
(vii) For distinct part medical rehabilitation units excluded from the DRG payment system.
(2) The hospital’s most recent cost report on file with the Department.
(b) From the hospital’s most recent cost report on file with the Department, the Department determines each hospital’s general care per diem cost, special care units per diem costs and cost to charge ratios for each of the hospital’s ancillary departments. For hospitals with excluded units, the general care per diem cost for the prospectively paid portion of the hospital will be used when available.
(c) The Department determines the cost of each claim in its paid claims file in the following manner:
(1) For claims from the year as the hospital’s most recent cost report on file with the Department, the cost of each claim is determined by:
(i) Multiplying the claim’s general care unit days by the hospital’s general care unit per diem.
(ii) Multiplying the claim’s special care unit days, if any, by the unit’s corresponding special care unit per diem.
(iii) Multiplying the ancillary charges indicated on the invoice by a cost to charge ratio that corresponds to the ancillary department. If detailed ancillary charges are not available, the overall cost to charge ratio of the hospital is used to convert changes to costs.
(iv) Adding the amounts established under subparagraphs (i)—(iii) to establish the costs of the claim.
(v) Removing, when necessary, the portion of the costs on the claims attributable to:
(A) Depreciation and interest.
(B) Direct medical education.
(C) Direct care physicians’ services.
(2) For claims from the years preceding the year of the hospital’s last filed cost report, the cost of the claim is inflated to be comparable in value to dollars of the year of the hospital’s last filed cost report.
(3) For claims from years following the year of the hospital’s last filed cost report, the cost of the claim is deflated to be comparable in value to dollars of the year of the hospital’s last filed cost report.
(d) The Department adjusts the cost of a claim computed under subsection (c) by:
(1) Computing a hospital specific average cost per case by dividing the total costs for claims in a hospital by the total number of claims for the hospital.
(2) Computing a Statewide average cost per case by dividing the total costs for all claims by the total number of claims.
(3) Dividing the cost per case established in paragraph (1) by the Statewide average cost per case established in paragraph (2) to determine a hospital specific standardization factor.
(4) Multiplying the cost of a hospital’s claim by its corresponding standardization factor.
(e) The Department computes the relative value for each DRG by:
(1) Determining the total standardized cost for all approved claims in the data base.
(2) Determining the total number of MA hospital cases in the data base.
(3) Dividing the total standardized costs by the total number of cases to establish a Statewide average cost per case for all cases.
(4) Determining the total costs and total number of cases for each DRG.
(5) Dividing the total costs for each DRG by the corresponding number of MA cases for that DRG to establish an average cost per case for each DRG.
(6) Dividing the average cost per case for each DRG by the Statewide average cost per case for all cases as determined under paragraph (3) to establish the relative value for each DRG.
Source The provisions of this § 1163.122 adopted June 22, 1984, effective July 1, 1984, 14 Pa.B. 2185; amended October 9, 1986, effective retroactively to July 1, 1984, 16 Pa.B. 3828; amended June 1, 1990, effective retroactively to July 1, 1988, 20 Pa.B. 2913. Immediately preceding text appears at serial pages (112241) to (112242) and (131031) to (131032).
Notes of Decisions During the first year of implementation of the prospective payment plan, it was appropriate to allow a hospital to request retroactive adjustments to its cost reports, even though the errors were unilateral and committed by the hospital. Lancaster General Hospital v. Department of Public Welfare, 535 A.2d 1238 (Pa. Cmwlth. 1988).
Cross References This section cited in 55 Pa. Code § 1163.52 (relating to prospective payment methodology).
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