LAUSR

Background: Under the inpatient prospective payment system (IPPS), Medicare assigns hospital discharges to medical severity-adjusted diagnosis related groups (MS-DRGs), and determines a fixed payment amount for each discharge based on its MS-DRG that is adjusted annually based on providers’ reported costs. Trends in these capitated reimbursement rates may affect the incentive for manufacturers to develop drugs and devices used in inpatient care, as well as the predilection of customers (hospitals) to purchase them. Methods: In this descriptive study, we analyzed the growth of inflation-adjusted MS-DRG base payment rates to acute care hospitals from 2009 to 2018. Results: Inflation-adjusted base reimbursement rates for MS-DRGs in continuous existence from 2009 to 2018 (N=211) had a median best-fit compound annual growth rate (CAGR) of -0.26%. Medical MS-DRGs exhibited a more negative median best-fit CAGR than surgical ones. Among surgical MS-DRGs, those related to musculoskeletal diagnoses had a larger median best-fit CAGR that was statistically significant compared with those associated with digestive or infectious disease diagnoses. Conclusions: The majority of MS-DRG base payment rates for inpatient discharges have failed to keep pace with inflation, and this negative growth is more pronounced in certain clinical areas. The relationship between these reimbursement trends and decision-making by manufacturers and hospitals warrants further study.