Question

What is the difference between cost-based reimbursedment system and the DRG based payment system that Medicare hass used in providing payments to hospital.

Answer 1

Cost-based reimbursement system is a traditonal system in making payment for healthcare services. Under this system a provider is reimbursed for the actual costs incurred for the treatment. In other words we can say that under this traditional system, amount is reimbursed for the actual calculated costs for the medical treatment.

On other hand DRG based payment system is a modern approach for making payment to the hospitals. Under this system payment to hospital is made on a fixed basis not on a actual incurred cost basis. In other words we can say that hospital is paid a fixed amount based on the patient’s DRG or diagnosis. So actual incurred costs do not have any connection with the payment system under this DRG approach. So if a hospital is incurring actually low costs in compare to DRG payment then it makes profits and on other hand if a hospital is incurring actually higher costs in compare to DRG payment then it makes losses for the hospital.

So overall we can say that cost-based reimbursement system is a traditional payment system under which payment is made on the basis of actual costs while under DRG system a fixed amount is paid to the hospital.