Opinion ID: 3009724
Heading Depth: 3
Heading Rank: 1

Heading: 1993 Repayment Methodology

Text: In 1993, New Jersey formulated a standardized, predetermined, statewide payment amount for over 700 separate Diagnosis Related Grouping's (DRGs). DRGs represent groups of patients that are clinically similar to one another and 5 relatively homogeneous with respect to resource utilization. For each hospital serving the state, rates were set for each DRG and a statewide mean for each DRG was established. To determine the mean, the State used 1988 hospital costs and 1991 billing data. Inflation factors were used to update 1988 hospital costs to 1993 levels. In addition, the mean-based DRGs were increased by a 2.5% operating margin factor to create a margin surplus. DRG payments included a capital cost allowance and a 9.15% adjustment designed to ease the transition from the pre-1993 system, which provided higher payments. The payment that a hospital received for a medicaid discharge depended on the DRG into which it fell.