Opinion ID: 475431
Heading Depth: 2
Heading Rank: 2

Heading: The New Jersey Hospital Reimbursement Control System

Text: 11 New Jersey's hospital reimbursement system was initially developed under a 1976 contract between the State Department of Health and HCFA, pursuant to the Secretary's demonstration-project authority. In 1979, the State Department of Health adopted regulations for applying the system to all third-party payers and to all general acute-care hospitals in the State. See N.J.Admin.Code tit. 8, Sec. 31B-3.19(a)(3); N.J.Stat.Ann. Sec. 26:2H-1 et seq. The State thereafter obtained a demonstration-project waiver from HCFA, covering reimbursements for both inpatient and outpatient services. 12 The New Jersey system has four salient features. First, the system is a prospective one. Rates are set on the basis of diagnosis-related groups (DRGs)--generally, illnesses and courses of treatment. 1 Second, as noted above, the system applies to all third-party payers, both commercial and governmental, and to all health-care providers. Third, it covers both inpatient and outpatient services. Finally, the system reimburses hospitals for uncompensated care--largely care provided to indigents--by including in the DRG rate base an estimate of the cost of such care. Thus, all third-party payers under the system, including Medicare, subsidize indigent care, although such care is not normally reimbursable under Medicare.