Managing Medicare reimbursement on medical-psychiatry units

Many general hospitals are confronting issues of financial strain precipitated to a large extent by Medicare payment reductions. The viability of psychiatry programs within general hospitals more than ever depends upon some demonstration of their financial as well as clinical contribution. The aim of this study is to review some of the basic parameters governing Part A (hospital) Medicare reimbursement of DRG-exempt general hospital psychiatry units and to provide options for improving their financial viability. There are a number of specific mechanisms involved in managing Medicare cost and reimbursement. Establishing a system for gatekeeping is important because significant control of payor mix and length of stay resides with the unit gatekeeper. Establishing liaison for short-stay patients with nursing home papers is important because Medicare pays on a target cost per discharge. The identification of short-stay patients is financially very favorable, and often critical to balance the unavoidable longer-stay patients. This paper also discusses how medical-psychiatric units can interface most effectively with medical-surgical units. Finally, there is some discussion of the need to develop pre- and postadmission outpatient medical-psychiatric programs. The financial aspects of medical-psychiatry care, if not the increasing scrutiny of managed care, will force further development of such outpatient programs.