Finance Case

The inpatient prospective payment system as it pertains to various disbursements available known as the Acute Inpatient System. The Acute Inpatient System set forth a system of payments based prospectively under the Social Security Act, Section 1866 Medicare Part A hospital insurance (Acute prospective payment system, 2012). Acute inpatient payments categorized into diagnosis groups. Acute diagnosis groups have an assigned weight applied to the diagnosis group to treat Medicare patients based on the average resources. After the weight of the payment applied then each share divided into labor and non-labor. Once divided into shares then adjusted in factors of wage index, which if applicable those located outside of the United States then the non-labor share adequately adjusted to the cost of living. Once adjusted to the cost of living then base payments multiplied to the specific diagnosis weight. Hospitals treating a larger amount of patients on mow-income then an add on percentage added to the payments and applied to the diagnostic related group adjustment payment rate The disproportionate share of Medicare payments provides a percent increase under either of the statutory formulas to hospitals that treat low-income patients (Acute prospective payment system, 2012).

Psychiatric inpatient payments since October 1, 1983 payments made under the system of the inpatient prospective payment system (Psychiatric prospective payment system, 2012). Even though under the payment system certain hospitals excluded as most diagnosis in those patients treated did not accurately account for resource costs and paid by Medicare although limited to certain cases under the Social Security Act, Section 1866 (b). Separate payments limits and target amounts adjusted each year based on an updated reason (Psychiatric prospective payment system, 2012). Hospitals with costs above their target rates, the payment based on the target rate for payment. Those hospitals below their