Contract modeling

How this is modeled

• Volume-weighted: every DRG in the mix is priced by the Medicare engine once, and each term is applied to every DRG, weighted by its discharges.
• Modeled tail: each DRG's charges are a lognormal around its average charges, with a spread (CV) matched to this hospital's own outlier share where its 2024 Medicare payments allow, else to CMS's national 5.1% of operating payments, or set by you. Stop-loss and outlier dollars are exact expectations over it; the Medicare outlier is the engine's own line above its threshold. Per diem stays get longer as their charges rise.
• % of Medicare: the basis you define times your percent. The default is the usual commercial basis: Original Medicare with IME, DSH, uncompensated care and the outlier, without the pass-through.
• Base rate × DRG weight: the contract's dollar rate times the MS-DRG relative weight, with an optional cost outlier.
• Order is precedence: the first payment term that covers a stay pays it. Add-ons follow. The lesser-of cap and the escalator always apply last.
• % of Medicare: shown two ways, as stated (against the scenario's own Medicare basis) and against all-in Medicare, with the pass-through dollars a basis leaves out.
• Likely range: the lowest and highest of four runs, the Medicare outlier at 3% and 8% of operating payments (the charge spread recalibrated), each with charges trended 2 points a year slower and faster.
• Your stays: upload a claim file and every stay is priced on its own charges and days, with a tie-out to what was paid.
• Multi-year: percent-of-Medicare terms float with the Medicare update, charge terms with the charge trend, fixed-dollar terms with the escalator only.

Print the methods appendix

A model of the terms you enter, not a reading of any contract and not a claims determination. Contract language on carve-outs, outliers and stop-loss varies; check the definitions in the agreement itself.

Terms used here

All-in Medicare

Everything Medicare pays the hospital for the stay: the DRG payment, capital, IME, DSH, uncompensated care, pass-through and the outlier.

Medicare basis

The part of the Medicare payment a percent-of-Medicare term is read against; most commercial contracts leave out the pass-through.

IME

Medicare's add-on for teaching hospitals.

DSH

Medicare's add-on for hospitals that serve many low-income patients.

UCP

Medicare's per-claim share of the uncompensated-care pool.

Pass-through

Direct graduate medical education and organ acquisition, paid by Medicare outside the DRG.

Outlier

Medicare's extra payment on a stay whose costs pass a threshold.

Stop-loss

More pay once billed charges pass a threshold: excess (a percent of the charges above it), first dollar (the greater of the payment and a percent of all charges) or replace (a percent of all charges instead).

Lesser of

Each stay paid no more than its billed charges.

Proxy mix

The hospital's own Medicare volumes standing in for a payer's mix, which is not public.

CV, charge spread

How widely a DRG's charges spread around its average in the modeled tail.

Likely range

The lowest and highest total if the Medicare outlier were 3% to 8% of operating payments and charges trended 2 points a year slower or faster: how much the answer rests on the modeled tail.

What is kept, and where

The scenarios (names and terms) are kept in this browser's storage; a pasted mix or a file of stays only if you tick “Keep this mix”. A share link carries the terms, each Medicare basis, the contract calendar, the hospital CCN and, for the sample, the sample mix's name: never volumes, charges, lengths of stay or stays. Terms opened from a link are not saved over your own unless you keep them. A priced baseline is kept so the same mix can be shown again with no request: a hospital's Medicare mix for a week in this browser, your own mix or stays only for this tab's session (or with the mix, if you keep it).