Short-Term Acute Care Hospital

Key facts

Medicare inpatient payment

Inpatient Prospective Payment System (IPPS), per discharge

Case classification

Medicare Severity Diagnosis Related Groups (MS-DRGs)

Outpatient payment

Outpatient Prospective Payment System (OPPS)

CCN range

Last four digits 0001 to 0879

Rate updates

Annual IPPS final rule, effective October 1

What is a short-term acute care hospital?

Short-term acute care hospitals are what most people picture as a hospital: emergency departments, operating rooms, intensive care units and general medical and surgical floors. Patients are admitted for conditions that need hospital-level care and are discharged home or to a post-acute setting once stable, usually within days.

The label is mainly a Medicare payment category. Hospitals paid under the IPPS are often called subsection (d) hospitals, after Section 1886(d) of the Social Security Act. Long-term care hospitals, inpatient rehabilitation facilities, psychiatric hospitals, children's hospitals and certain cancer hospitals are excluded from the IPPS. Critical Access Hospitals are paid on a cost basis, and Maryland hospitals are paid under a special state arrangement.

How IPPS payment works

Medicare pays a predetermined amount per discharge rather than per day or per service. The main components are:

Whether a stay counts as inpatient also matters. Under the two-midnight rule, adopted in 2013, a Part A admission is generally appropriate when the physician expects the patient to need hospital care spanning at least two midnights. Shorter stays are often billed as outpatient observation instead.

• An MS-DRG assigned from the principal diagnosis, procedures, complications and comorbidities, each with a relative weight.
• A standardized base rate adjusted for local labor costs using the hospital wage index.
• Add-on payments for indirect medical education, disproportionate share and uncompensated care, new technologies and high-cost outlier cases.
• Adjustments from quality programs such as the Hospital Readmissions Reduction Program and the Hospital-Acquired Condition Reduction Program.

Why acute care hospitals matter

Acute care hospitals concentrate most inpatient spending and activity:

• Most inpatient procedures, hospital-administered drugs and implanted devices are delivered here, making them the core account list for pharma and medtech teams.
• Medicare inpatient claims summarized by hospital and MS-DRG show which hospitals perform which procedures, useful for targeting and trial site selection.
• IPPS hospitals file Medicare cost reports, the main public source for beds, payer mix and margins.
• Separating acute care hospitals from post-acute and specialty hospitals avoids distorted comparisons of length of stay and cost per case.