4/9/96 Memo--Explanation of DRG Compromise

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Raleigh, NC 27611

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April 8, 1996

TO: Hospitals, Employers, Insurance Companies, Self-Insureds, TPAs

FROM: N.C. Industrial Commission (Commissioner Thomas J. Bolch, contact person)

SUBJECT: Explanation of DRG compromise

Representatives of employers, insurance carriers and selfinsurers as well as representatives of the Industrial Commission and the N.C. Hospital Association arrived at a compromise interim solution of the DRG methodology at the end of March. Under the compromise, those bills for hospital admissions from July 1, 1995, through March 31, 1996, will be handled under the DRG rules in effect in that period under the State Health Plan.

Bills for hospital admissions from 1 April 1996 through 30 June 1997 will follow the DRG methodology of the State Health Plan with the exception that they will be no lower than 90% of the itemized hospital bill and no higher than 100% of the itemized hospital bill.

Other requirements of the compromise:

  1. The Industrial Commission will furnish to Hospital Providers a copy of the Bill Analysis at the same time it furnishes it to the Carrier or Third Party Administrator;

  2. Bills from Hospitals that have been held unprocessed by the Industrial Commission will be processed promptly using the DRG system in effect on March 29, 1996; (some 300 or more bills where the DRG amount exceeded the hospital charges have been held unprocessed by the Commission since February 15, 1996).

  3. Correction bills furnished by the Industrial Commission will be paid according to their terms; (the Industrial Commission sent out 2 sets of corrected bills, the first set because of a change in the low length of stay trim point used by the State Health Plan and the second because of incorrect coding by the Industrial Commission).

  4. Since July 1, 1995, if a Hospital Provider has been paid less than the amount approved by the Industrial Commission, the Hospital Provider shall first try to work out the controversy with the Payor, and, failing being able to work it out to its satisfaction, may have the Commission attempt to work out the matter administratively by asking the Commission to attempt to do so or may have the bill dispute adjudicated by the Industrial Commission by filing a written request for a hearing. If the Hospital Provider payment calculated by the Commission was incorrect, the Hospital Provider is entitled to pursue its administrative and legal remedies.

  5. The proposed statute attached hereto will be implemented on an interim basis by the Industrial Commission and the parties pending its enactment.



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95RR063E ( )

Short Title: Hospital Reimbursement. (Public)


Referred to:


The General Assembly of North Carolina enacts:

Section 1. G.S. 9726(b) reads as rewritten:

"(b) Hospital Fees. -- Payment for medical compensation rendered by a hospital participating in the State Plan, except as otherwise provided herein, shall be equal to the payment the hospital receives for the same treatment and services under the State Plan, provided that such payment with respect to inpatient hospital services shall not be less than ninety percent (90%) nor more than one hundred percent (100%) of the hospital's itemized charges as shown on the UB92 claim form. A hospital's itemized charges on the UB92 claim form for workers' compensation services shall be the same as itemized charges for like services for all other payors during the period from April 1, 1996, through June 30, 1997. Payment for a particular type of medical compensation that is not covered under the State Plan shall be based on the allowable charge under the State Plan for comparable services or treatment, as determined by the Commission. Each hospital subject to the provisions of this subsection shall be reimbursed the amount provided for in this subsection unless it has agreed under contract with the insurer, managed care organization, or employer to accept a different amount or reimbursement methodology. "

Sec. 2. This act becomes effective April 1, 1996, and applies to hospital inpatient admissions occurring on or after that date. This act expires on June 30, 1997, and its expiration applies to all hospital inpatient admissions occurring on or after that date.

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