Financial Impact of Medicare IPPS Ruling on Hospitals Available through

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Significant changes for the Medicare Hospital Inpatient Prospective Payment System are in the works for October 1, but many hospitals are not aware of how profoundly the IPPS proposed rule will affect how they do business. American Hospital Directory ( has calculated and projected the financial impact of those proposed changes for more than 6,000 hospitals in the United States.

Proposed changes to the Medicare payment system will significantly affect hospital reimbursements, yet many administrators find it difficult to assess the ruling's impact on their specific hospital. To give hospital executives useful information, American Hospital Directory ( has created an analysis that provides projections of the financial effect the Medicare Hospital Inpatient Prospective Payment System (IPPS) ruling will have on individual hospitals.

IPPS is the system by which Medicare pays the hospital for inpatient care.. Among the proposed IPPS changes published in May are a new methodology for defining relative weights based on hospital-specific costs and refined diagnosis-related groups (DRGs) to more effectively use Medicare coding to recognize the severity of illnesses. As a result, some medical service lines and DRGs are expected to realize an increase in revenue derived from Medicare reimbursements while other service lines will notice a reduction in revenue.

American Hospital Directory maintains a database of information for more than 6,000 U.S. hospitals, using public and private sources including Medicare claims data and hospital cost reports. Their free website at provides summary hospital data and a subscription service is available for those who want additional detail. The overall impact of the proposed DRG changes is projected on the free site and the subscription service provides detail by medical service lines, including cardiovascular surgery, orthopedics, neurology, and general surgery, from fiscal year 2004 through fiscal year 2008, when the refined DRGs are projected to be in place.

Custom data sets with even more specific projections are also available, says Paul Shoemaker, the directory's president and CEO. We want to assist hospitals in interpreting the potential effects of proposed changes and will update projections based on final regulations when they are published.

The federal Centers for Medicare and Medicaid Services (CMS) adjusts the DRG payment system annually, but the currently proposed changes are significantly more comprehensive and will result in profound changes among medical service lines, Shoemaker explains. The changes may force some hospital administrators to alter their marketing strategy or expand their medical offerings into service lines previously considered less profitable, according to health care analysts.

“It is difficult to know how the rulings impact a hospital without the CSA-DRG information,” said Leatrice Ford, CEO of ConsultCare Partners, a coding and billing consulting firm specializing in cardiology. “The AHD information gives us a strong tool to see what the rule will mean for each hospital.”

The company hopes that all hospitals will take advantage of these important projections as reported on the free site. For those interested in more detailed projections, annual subscriptions are only $395, with unlimited access to extensive reports that have been developed by experienced health care professionals and continually enhanced based on feedback from subscribers.

About American Hospital Directory

The American Hospital Directory ( provides online data about more than 6,000 hospitals in the United States. The extensive database of information is built from both public and private sources including Medicare claims data (MedPAR and OPPS), hospital cost reports, and other files obtained from the federal Centers for Medicare and Medicaid Services (CMS). AHD was founded in 1996 and today serves more than 10,000 visitors per day.


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Barbara Eilert

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