What is the basis for payment under the Inpatient Prospective Payment System (IPPS)?

• A. Ambulatory Payment Classifications (APCs)
• B. Resource Utilization Groups (RUGs)
• C. Diagnostic Related Groups (DRGs)
• D. Case Mix Index (CMI)

Answer: (C)

Under the Inpatient Prospective Payment System, payment is determined by grouping each inpatient stay into a diagnostic related group. DRGs categorize cases with similar clinical conditions and similar expected resource use, so the hospital’s payment reflects what a typical case like that costs, rather than the exact services billed. Each DRG carries a weight that represents relative cost, and the base rate is adjusted for factors such as wage levels in the hospital’s region, teaching status, and disproportionate share considerations; there can also be adjustments for outlier cases. Ambulatory Payment Classifications apply to outpatient billing, not inpatient stays; Resource Utilization Groups are used in post-acute settings like skilled nursing facilities; and Case Mix Index is a hospital-wide metric used to adjust payments but is not the payment basis itself. So the basis for IPPS payment is the Diagnostic Related Group.