The Economics of Covid Hospital Treatment

By Jerry PDX
Wednesday, September 29, 2021 at 10:14:00 P.M. EDT

Did a little research on what DRG reimbursement is and what I found was very interesting:

https://www.jdsupra.com/legalnews/cms-hikes-payment-for-covid-19-19452/

https://www.verywellhealth.com/how-does-a-drg-determine-how-much-a-hospital-gets-paid-1738874

From the article:

CMS said Oct. 28 that Medicare will pay hospitals extra when they treat inpatients with drugs or biologicals approved by the Food and Drug Administration (FDA) for COVID-19. The additional payments are linked to the 20% bonus hospitals already receive for COVID-19 MS-DRGs, and both require proof of a positive COVID-19 test, according to the fourth interim final rule with comment period (IFC).[1] CMS also raised the specter of post-payment reviews.

Hospitals will receive an additional payment when treatment includes Veklury (remdesivir) or COVID-19 convalescent plasma to treat patients diagnosed with COVID-19. Like a new technology add-on payment, the cost of the drug won’t be entirely folded into the MS-DRG.

The only hitch is hospitals must ensure they make a connection to the Medicare bonus for COVID-19 inpatients, said attorney Daniel Hettich, with King & Spalding in Washington, D.C. “You have to be eligible for the 20% add-on to get the new therapeutic add-on,” he said. “If you don’t have a positive test, you don’t qualify for the new treatment add-on payment.”

Normally, Medicare outlier payments, which are extra payments for cases with extraordinarily high costs, only kick in after the hospital has incurred $30,000 in costs above the MS-DRG payment. In other words, under the standard outlier rules, a hospital would only receive 80% of the costs that exceed $30,000 of the IPPS payment, which means that hospitals eat the first $30,000 in losses. Under the IFC, however, when hospitals provide remdesivir or COVID-19 convalescent plasma and the patient has a positive COVID-19 test, Medicare will share in 65% of the first dollar losses that exceed the MS-DRG reimbursement up to the $30,000 outlier threshold.

Sounds like strong financial incentive for hospitals to have lots of positive tests and keep patients in ICU as long as possible to rack up costs and get past that 30K threshold so they can get into the black.

N.S.: But the hospital is still losing money. After all, the reimbursements are still less than what the hospitals are shelling out. This doesn’t make business sense for anyone but the medical tech and pharmaceutical companies.