Overview of MS-DRG Pricing Used Before Jan. 1, 2017 (APR DRG Pricing began Jan. 1, 2017)

Prior to January 1, 2017, the MS-DRG rates and weights were updated and published annually. In accordance with federal regulations, Wisconsin provided public notice and an opportunity for written, public comments regarding the proposed hospital reimbursement methodology, inpatient hospital rates, and inpatient hospital weights prior to final approval by the federal Department of Health and Human Services. Current inpatient hospital APR DRG rates and weights and archived inpatient hospital weights and rates are available. A more detailed description of rate-setting can be found in the Wisconsin Medicaid inpatient and outpatient state plans.

MS-DRG Weights

Prior to January 1, 2017 ForwardHealth applied the Medicare grouper and its enhancements to Wisconsin-specific claims data to establish a relative weight for each of over 700 DRGs based on statewide average hospital costs. These weights reflect the relative resource consumption of each inpatient stay. For example, the average hospitalization with a DRG weight of 1.5 would consume 50% more resources than the average hospitalization with a weight of 1.0; a hospital stay assigned a DRG with a weight of .5 would require half the resources.

Hospital Inpatient Base Rate

Prior to January 1, 2017, ForwardHealth calculated and assigned a payment rate, per inpatient discharge, to each hospital for the rate year. This calculation determined a unique "hospital-specific MS-DRG base rate" for the hospital. The hospital-specific MS-DRG base rate included an adjustment for differences in wage and labor levels among rural and metropolitan areas throughout the state. This rate also included amounts for:

• Capital costs,
• Direct costs of a medical education program, and/or
• Direct costs associated with the hospital being located in a rural area

Payment to a hospital for a member's hospital stay was calculated by multiplying the hospital's specific MS-DRG base rate by the weight assigned to the DRG into which the stay is classified by the grouper.

Historic EAPG State-Specific Weight Calculation

Prior to January 1, 2017, eligible date of payment State Fiscal Year (SFY) 2013, SFY2014, and SFY2015 outpatient claims data were used to calculate the cost for each individual EAPG. The EAPGs are discrete and service-specific, so each line on a claim will group to a separate EAPG.
Cost centers from the Medicare Cost Report were assigned to each line of each claim using a crosswalk based on revenue codes. The hospital-specific, cost-center-specific cost-to-charge ratio (CCR) was applied to charges associated with the claim line. The CCRs were calculated from the Medicare cost report data published by the Centers for Medicare and Medicaid Services within the Healthcare Cost Report Information System (HCRIS).
These costs were normalized across hospitals and time periods. The average cost of each EAPG was calculated by dividing the total EAPG costs (after removing any outliers) by the number of claims assigned to that EAPG.

Total EAPG Costs ÷ Number of Claims = Average Cost of Each EAPG

The weight for each EAPG was calculated by dividing the average cost of that EAPG by the average cost of all EAPGs.

Average Cost of EAPG ÷ Average Cost of All EAPGs = Individual EAPG Weight