Resources · Billing & Reimbursement

Billing for Hospitals

How hospitals are paid

Medicare payments for hospital admissions are far more complicated than physician (RVU) payments. Several factors change how much different hospitals are paid for the same admission:

Geographic location
Average regional wages — applied as a wage index to the labor portion of the payment
Uninsured burden — the percentage of uninsured patients treated at the facility
GME programs — teaching hospitals with residency programs qualify for additional payments

The system Medicare uses to set these payments is the Inpatient Prospective Payment System (IPPS). Under IPPS, hospitals are paid per discharge — whatever the workup or diagnostic burden, the payment is almost the same (with some exceptions).

For each discharged patient, a primary diagnosis and secondary diagnoses are sent to Medicare. Primary diagnoses are grouped into roughly 800 Diagnosis-Related Groups (DRGs). Each DRG qualifies for a set sum — part to cover the inpatient stay, and part for capital expenses (keeping the hospital running).

DRGs and the CC / MCC tiers

DRGs are broad-line diagnoses that group many ICD codes. Because a patient’s condition can be simple or complicated, each DRG is classified by the presence or absence of comorbidities and complications:

Tier	What it means	Payment
DRG without CC/MCC	No comorbidities or complications	Lowest payment for the diagnosis
DRG with CC	With a comorbidity/complication (e.g. hemiparesis, hyponatremia)	Higher payment
DRG with MCC	With a major complication — e.g. cerebral edema, midline shift, hemorrhagic transformation, acute respiratory failure	Highest payment for that diagnosis

Remember: physician reimbursement (RVUs) is entirely separate from hospital reimbursement (DRGs) — they are billed and paid independently for the same admission. But your documentation drives the DRG, so the neurologist directly determines which tier the hospital is paid at.

How a DRG payment is calculated

The operating payment for an admission is, in essence:

Payment ≈ DRG relative weight × hospital base rate

The relative weight reflects how resource-intensive that DRG is (a weight of 1.0 = the average admission). The base rate is a national standardized amount — $6,606.51 for operating costs in FY2025 — that each hospital then adjusts by its local wage index (plus capital, IME, and DSH add-ons). So the same diagnosis pays more at a high-wage-index hospital, and a higher-weight DRG pays more everywhere.

Pick a scenario and (optionally) set your hospital’s base rate to estimate the operating payment:

Estimate of the operating portion only (weight × base rate); actual payment also includes capital, wage-index, IME/DSH, and outlier adjustments, minus the 2% sequester. FY2025 relative weights from the CMS IPPS Final Rule (Table 5).

Neurology DRG reimbursement examples

The same patient can land in very different DRGs depending on what is documented. Using the FY2025 weights and the national operating base ($6,606.51):

Scenario	MS-DRG	Weight	≈ Operating payment
Ischemic stroke / ICH — no CC/MCC	066	0.6883	$4,547
… with a CC (e.g. hemiparesis, hyponatremia)	065	1.0170	$6,719
… with an MCC (e.g. cerebral edema)	064	1.9891	$13,141
Stroke + thrombolytic (tPA/TNK) — no CC/MCC	063	1.4047	$9,280
… thrombolytic + CC	062	1.7808	$11,765
… thrombolytic + MCC	061	2.7032	$17,859
Seizures — without MCC	101	0.9216	$6,089
Seizures — with MCC	100	1.9852	$13,115
Headache — without MCC	103	0.8502	$5,617
Headache — with MCC	102	1.1594	$7,660
Bacterial / TB meningitis — no CC/MCC	096	2.3970	$15,836
… with a CC	095	2.3970	$15,836
… with an MCC	094	3.6484	$24,103
Viral meningitis — no CC/MCC	076	0.9169	$6,058
Viral meningitis — with CC/MCC	075	1.7224	$11,379
SAH — aneurysm coiled / clipped, no CC/MCC	022	3.5304	$23,324
… coiled / clipped, with a CC	021	5.5273	$36,516
… coiled / clipped, with an MCC	020	8.0605	$53,252

Notice the patterns: for the same stroke, capturing a CC adds ~$2,200 and an MCC nearly triples the payment; documenting the thrombolytic moves the case to the 061–063 family entirely. A few condition-specific notes:

SAH: managed medically, a subarachnoid hemorrhage groups with the intracranial-hemorrhage family (DRG 064–066, the same as the top rows). But once the aneurysm is coiled or clipped, it jumps to the surgical family (020–022) — a $23K–$53K swing — so the procedure, not just the diagnosis, drives the DRG.
Headache (102/103) has only two tiers (with / without MCC) and is one of the lowest-weighted neurology admissions — documenting any qualifying MCC is what changes it.
Meningitis: bacterial/TB (094–096) pays roughly 2–3× viral (075/076); name the organism and the type. (Note: in FY2025 the bacterial "with CC" and "no CC/MCC" tiers happen to carry the same weight, so the big step is capturing an MCC.)

How documentation changes the DRG — and the CMI

Your Case Mix Index (CMI) is the average DRG relative weight across your discharges. Because every captured CC/MCC raises a case’s weight, accurate documentation raises the CMI — and the CMI scales the entire service line’s revenue. The lever is specific language: vague terms code to nothing, while the precise diagnosis codes to a CC or MCC.

Instead of writing…	Write…	Captures
"altered mental status"	metabolic or toxic encephalopathy	MCC
"right-sided weakness"	hemiparesis / hemiplegia	CC
"brain swelling" / "looks edematous"	cerebral edema; brain compression / herniation	MCC
"low sodium"	hyponatremia	CC
"respiratory distress" / "on BiPAP"	acute respiratory failure (with hypoxia/hypercapnia)	MCC
"aspiration" (the event)	aspiration pneumonia	MCC
"bedbound" / "totally dependent" / "contractures"	functional quadriplegia	MCC
"poor PO intake" / "cachectic"	severe protein-calorie malnutrition (per criteria)	MCC
"encephalopathy" (unspecified = CC)	metabolic or toxic encephalopathy	CC → MCC
"rising creatinine" / "dehydration"	acute kidney injury (when criteria met)	CC
"UTI with SIRS" / "bacteremia"	sepsis / severe sepsis (when criteria met)	MCC

Documentation traps worth knowing (counterintuitive — these capture less than people assume):

Status epilepticus, coded alone (G41.x), is NEITHER a CC nor an MCC. "Status" by itself does not raise the seizure DRG. What earns credit is linking it to the underlying epilepsy — "epilepsy with status epilepticus" (G40 family) is a CC — or capturing a true MCC of the admission (e.g. acute respiratory failure from the event).
Dysphagia by itself is NOT a CC (common misconception). Its value is in linking it to aspiration pneumonia (MCC) when that occurs.
Only stage 3 / stage 4 pressure ulcers are MCCs. "Unstageable," stage 1, and stage 2 capture nothing — so always stage the ulcer, and don't assume "unstageable" is the most weighted.
Quadriplegia (G82.5) is an MCC, but paraplegia (G82.2) is only a CC — and hemiplegia / hemiparesis (G81) is a CC. The level of injury changes the tier.
"Pneumonia, unspecified" (J18.9) is itself an MCC — you don't need to prove aspiration to get MCC-level credit for a pneumonia (aspiration pneumonia is also an MCC).
The Glasgow Coma Scale total-score codes (R40.241–.244) capture nothing — but documented "coma" (R40.20) is an MCC. Describe the clinical state, not just the score.
Hemorrhagic transformation of an infarct — code both: cerebral infarction (I63.-, principal) plus nontraumatic intracerebral hemorrhage (I61.-, secondary). The I61 is an MCC, so it moves the case to DRG 064 (~$13,141 vs ~$4,547) — provided you document the conversion in words, not just on imaging (per AHA Coding Clinic, code both). The infarct and the bleed are two distinct conditions, so the MCC counts. (It only fails to count when a hemorrhage is itself the principal diagnosis — a primary ICH can't double-count itself as its own complication.)

How to improve hospital billing & revenue

Document the principal diagnosis precisely on day one — "cerebral infarction, left MCA" beats "stroke."
Name every active comorbidity you are treating and tie it to the encounter (the diabetes you adjust insulin for, the hyponatremia you correct, the hemiparesis you rehab).
Use the diagnosis, not the finding — encephalopathy (not "confusion"), acute respiratory failure (not "on BiPAP"), aspiration pneumonia (not "aspirated").
Respond to CDI / coder queries — a one-line clarification can move a case from "no CC/MCC" to "with MCC."
Capture present-on-admission vs hospital-acquired status — it affects whether a complication counts toward payment.
Document the thrombolytic (tPA/tenecteplase) explicitly — it changes the DRG family.

Average payments per neurological DRG are published by CMS — see the CMS Medicare Inpatient Hospitals summary data, and the IPPS Final Rule Table 5 for current relative weights. Figures here are FY2025; weights and the base rate update each federal fiscal year (Oct 1).

Ahmed Koriesh, MD