Bulletin 97-2 (attachment)
January 3, 1997


Questions and Answers

Inpatient Hospital Fee Schedule

1. Why is the Division of Workers' Compensation establishing a fee schedule for inpatient hospital admissions?

Labor Code Section 5307.1 mandates that DWC establish a maximum schedule for medical services provided to patients who have been admitted by hospitals.

2. What is the effective date of the schedule?

The implementation date was set for April 1, 1997 in order to provide claims administrators sufficient lead time to implement the new schedule. Only hospital admissions on or after this date will subject to the schedule.

3. How does the schedule operate?

The maximum payment for each hospitalization is 120% of the product of that hospital's composite factor and the weight assigned to the applicable Diagnosis Related Group (DRG).

4. What are composite factors and DRGs? Where do we get them?

Each hospital governed by the fee schedule is assigned its own composite factor. These factors are based on Medicare variables used by the federal Health Care Financing Administration to calculate prospective operating and capital costs. At the time of discharge, each admission should be assigned a Diagnosis Related Group. For the purpose of this schedule, the DRG calculation should be based on Medicare's method for assigning DRGs. Each year, DWC will publish the composite factors and weights for hospitals and DRGs.

5. How do we use this information to pay a typical bill?

Most hospital bills should arrive on a Universal Hospital Billing Form 1992 (UB92). There are designated spaces on the form for the hospital to list its Medicare ID number and the DRG number. A payer can use the Medicare ID number to look up the hospital's composite factor in the fee schedule. Similarly, the payer can use the DRG number to determine the appropriate weight.

6. Can we still contract for inpatient hospital services?

Yes, the fee schedule allows hospitals and employers or insurers or an agent acting on their behalf, such as a PPO, to enter into contracts. If a contract applies to a hospitalization, the contract supersedes the fee schedule.

7. Besides contracted admissions, what other types of admissions are excluded from the schedule?

In general, the schedule has excluded admissions that are not routine or are difficult to administer. Also excluded are admissions in which the hospital stay exceeds the "outlier threshold" published for that DRG in the fee schedule, where the length of the stay is much longer than expected. In addition, under certain conditions, admissions to trauma centers and rehabilitation centers are excluded. Out-of-state hospital admissions are also excluded.

8. What types of hospital services are excluded from the schedule?

In general, the schedule is a global fee for all services performed with respect to the admission. However, the schedule does allow separate reimbursement for durable medical equipment for use at home.

9. How are transfers between hospitals governed?

The maximum amounts contained in the fee schedule are primarily for routine hospital services. Transfers generally involve more complex services, and it is not expected that many admissions subject to the schedule will fall into this group. However, DWC has set up a slightly different payment schedule for these admissions. In brief, the hospital that receives the patient will be reimbursed as any other admission. The hospital that transfers the patient will receive a prorated amount.

10. What if DWC does not have a composite factor for a hospital?

Some hospitals in California are relatively new, and Medicare has not yet published factors for them. Until Medicare releases these factors in subsequent Fall updates, admissions at these hospitals will be excluded.

11. How do I get a copy of the schedule?

You may download a Windows or Macintosh copy of the schedule and other information necessary to calculate payments from DWC's site on the world wide web. You may also request a copy by writing to Division of Worker's Compensation, P.O. Box 420603, San Francisco, CA 94152 Attn: Inpatient Hospital Fee Schedule. There is no charge for this information.