There are three main methods of billing in-hospital patient visits. The patient can be billed by the surgeon, anaesthetist and the hospital separately.

Per Diem, Case Based and DRG.

Per Diem is a Latin phrase which translates to ‘by the day’ and refers to billing a patient for each individual item that they receive. A typical per diem bill will include accommodation, theatre etc, consumable products like staples and prosthetics used in the procedure. Below is an example of per diem billing for a study on mice.

Case Based is when the hospital charge a predetermined fixed bundled fee for each treated hospital case. In the example above the charge would be for the study at $76.00. Each item within the study wouldn’t be listed and charged separately.

DRG is very similar to case based. The hospital charges a predetermined fixed fee for each treatment case but the way these items are created are based on DRG (Diagnosis Related Groups) which makes it easier for insurance companies and Medicare to regulate the fees paid and ensure that the products charged in each hospital are the same.

Difference between DRG and Case Based Billing.

A case based system could see two hospitals charge the same fee for a service but the services provided may vary within that group between hospitals. IE A theoretical example – In the case of a hip replacement Hospital A may charge $5000 and this fee is for the operation and recovery. Hospital B may charge the same fee for a hip replacement but include an additional service such as a few physiotherapy sessions. As each hospital create their own item its very difficult to compare them. DRG forces the hospital to base the cost on the DRG criteria which means it easier to compare different hospitals and for insurance companies to negotiate the amounts that they will pay for each service.

Most hospitals would prefer to charge per diem as they are able to charge the exact amount for every item within a service that they provide.

Insurance companies and Medicare prefer payment based on DRG. If DRG is not used in the hospital then the insurance company may accept Case Based and finally if there is no other option may accept Per Diem. It would be very possible that a hospital would charge a negotiated DRG amount to the insurance company and charge private patients a much higher per diem rate for exactly the same service.

To see the fees for a particular health fund click Setup and Health Fund Fees from the main menu.

Click DRG & CaseBase to view or edit the current fees.