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This page describes payment methodologies for fee-for-service (FFS) inpatient hospital services provided by diagnosis related group (DRG) hospitals, critical access hospitals, and rehabilitation hospitals. Minnesota Health Care Programs (MHCP) is required to rebase inpatient hospital payment rates July 1, 2017, and every two years after that.
Inpatient rates were rebased effective July 1, 2021. The base year for the 2021 rates is 2018. The July 1, 2021, hospital rates were implemented prospectively.
The Minnesota Department of Human Services (DHS) has completed the move from the Centers for Medicare & Medicaid Services Diagnosis Related Group (CMS-DRG) version 23 to All-Patient Refined Diagnostic Related Group (APR-DRG). This greatly enhances DHS’ ability to pay appropriately for the level of resources used, the severity of illness, and the risk of mortality. As of July 1, 2021, we have updated to version 38 of the APR-DRG group.
The July 1, 2021, rebasing incorporates a 3.3 percent increase in aggregate payments.
To review the payment methodology, refer to the:
Minnesota Medicaid DRG pricing calculator and instructions
Use the DRG pricing calculators to estimate payment for inpatient fee-for service stays covered by Medical Assistance (Minnesota’s Medicaid program) and paid using the DRG payment methodology:
Minnesota statute allows DHS to consider payment adjustments for specific services. The payment methodology for discharges on or after July 1, 2019, incorporates adjustments for mental health services, specialty mental health services, normal newborn services, obstetric services, burn services, transplant services, and pediatric services. Payments for services delivered in rehabilitation hospitals and distinct part rehabilitation units continue to be incorporated into the general acute care inpatient payment methodology by adding a payment adjuster for rehabilitation services. The policy adjuster table below shows the payment adjuster values over time.
Refer to Policy Adjuster Values (DHS-7619) (PDF) for the adjuster value for each service eligible for an adjustment based on the date range indicated.
DHS is required to rebase inpatient hospital payments every two years beginning July 1, 2017. We are in the process of implementing the July 1, 2019, rebasing which uses 2016 as the base year. The next scheduled rebasing will take place July 1, 2021.
Disproportionate Share Hospitals, also known as DSH hospitals, provide services for a disproportionate percentage of low-income patients that are uninsured or covered by Medicaid in comparison to other hospitals within the state.
Section 1923 of the Social Security Act requires states take into account the situation of hospitals that serve a disproportionate share of low-income patients when making Medicaid payments to the hospitals. To make this payment, the State of Minnesota processes DSH adjustments through a percent increase on each inpatient hospital claim. The percentage add on varies by hospital depending on factors.
A Minnesota hospital must meet specific qualifications to qualify for a DSH payment. DSH payments to state-owned and Indian Health Service facilities are not covered by the methodology described by the following. A hospital must not be a critical access hospital and it must meet the following criteria to be eligible for a DSH payment.
Eligible children’s and non-children’s hospitals that are also designated as essential safety net hospitals may qualify for a safety net DPA factor in addition to the other factors already determined.
Eligible hospitals that are not licensed children’s hospitals may qualify for the contract bed factor, the transplant hospital factor and one of three volume factors.
Final DPA Factor = 1 + Contract Bed Factor + Transplant Factor + Volume Factor + Safety Net Factor
Eligible hospitals that are licensed children’s hospitals may qualify for one DPA factor based on the number of fee-for-service Medical Assistance discharges in the base year.
The applicable DPA factor (from licensed children’s hospitals with at least 1,000 FFS discharges in the base year OR licensed children’s hospitals with fewer than 1,000 FFS discharges in the base year) plus the applicable factor from safety net hospitals is the final DPA factor for the qualifying children’s hospital.
In the event that DPA payments to a qualifying hospital exceed the facility-specific DSH limit for the hospital for the applicable DSH year, the DPA payment to the hospital will be limited to the facility-specific DSH limit. Payments in excess of the applicable facility specific DSH limit are returned to the Department for redistribution to qualifying hospitals. The facility-specific DSH limit is the hospital’s inpatient and outpatient costs for services to Medicaid patients and the uninsured, minus payments received for Medicaid patients, or from uninsured patients.
Excess DPA payments that are returned to the DHS according to their limitations shall be redistributed to qualifying hospitals. Hospitals qualified to accept redistributed DPA funding must:
Distribution of the returned DPA funding to qualifying hospitals is based on each hospital’s Medical Assistance fee-for-service discharges expressed as a percentage of the total Medical Assistance fee-for-service discharges of all of the hospitals qualified to receive additional DPA payments. The final redistributed DPA payment amount to a receiving hospital may not result in total DPA payments to that hospital exceeding the limit defined in the limitation of the DPA amount.
Final Redistributed DPA Payment Amount Formula
| Final Redistributed DPA Payment Amount = | Lesser of:
The difference between the amount paid according to the hospital’s factors and their limitation or The amount equal to the total amount of refundable DPA funding, multiplied by (the hospital’s number of fee-for-service MA discharges divided by the total number of fee-for-service MA discharges of all of the hospitals eligible to receive redistributed DPA funds in the rate year). |
The Federal Medicaid agency, CMS, requires states to have an annual DSH audit performed by an agency that is independent of the state Medicaid agency, and any of the DSH Hospitals that are subject to the audit. The purpose of the audit is to verify that DSH payments to any given hospital do not exceed that hospital’s losses for treating Medicaid patient or patients that are uninsured.
DHS is required to have an independent certified audit of its Disproportionate Share Hospital Program (DSH). The following documents contain the protocol that is provided to the auditor along with the current list of hospitals that receive DSH payments.
Minnesota Statutes, 256.969 (Payment Rates)
Section 1923 social security act (Disproportionate Share Hospital)
Code of Regulations, title 42, subchapter C, part 447, subpart E (Medicaid disproportionate share hospital allotment reductions)
Code of Federal Regulations, title 42, subchapter C, part 455, subpart D (Independent certified audit of state disproportionate share hospital payment adjustments)
