New Jersey Administrative Code
Title 10 - HUMAN SERVICES
Chapter 52 - HOSPITAL SERVICES MANUAL
Subchapter 14 - METHODOLOGY FOR ESTABLISHING DRG PAYMENT RATES FOR INPATIENT SERVICES AT GENERAL ACUTE CARE HOSPITALS BASED ON DRG WEIGHTS AND A STATEWIDE BASE RATE
Section 10:52-14.3 - Calculation of the DRG weights

(a) A Statewide relative weight for each DRG was developed using the most recent available audited Medicare cost report data and Medicaid/NJ FamilyCare paid claims data for the same year. The cost data used excludes direct and indirect medical education costs. In the initial rate year, 2003 audited Medicare cost report data and 2003 Medicaid/NJ FamilyCare claim data were used to develop the DRG weights.

(b) Charges from the Medicaid/NJ FamilyCare claims were converted to cost by multiplying the routine cost center per diem costs from the Medicare cost reports times the number of routine days from the Medicaid/NJ FamilyCare claims using a hospital specific crosswalk between revenue codes and hospital cost centers, and multiplying the ancillary cost center cost-to-charge ratios from the Medicare cost reports times the ancillary charges from the Medicaid/NJ FamilyCare claims using a hospital specific crosswalk between revenue codes and hospital cost centers.

(c) The calculated routine and ancillary costs were aggregated by DRG and were used to develop total Statewide costs for each DRG.

(d) The formula used to calculate a DRG weight is as follows: the Statewide average cost per inlier case for a specific DRG divided by the Statewide average cost per inlier case for all DRGs.

(e) DRGs that did not have sufficient Medicaid/NJ FamilyCare claim volume to develop a statistically valid weight using the DRG weight setting methodology in (d) above had a weight derived from additional sources. For these DRGs, charity care claim volume was added to the Medicaid/NJ FamilyCare claim volume using the methodology in (d) above to establish a stable DRG weight. In cases where using this secondary data set did not yield a stable DRG weight, the normalized DRG weight from the corresponding New York AP DRG Grouper was used.

(f) An annual inflation factor was used to calculate inflation of routine and ancillary cost data. The inflation factor used was the excluded hospital market basket percentage increase, which is used by the Center for Medicare and Medicaid Services (CMS) for hospitals excluded from its Inpatient Prospective Payment System (IPPS), and is published in the Federal Register annually by CMS. The excluded hospital inflation factor has also been referred to as the economic factor recognized under the CMS Tax Equity and Fiscal Responsibility Act, Pub.L. 97-248, (TEFRA) target limitations.

(g) Recalibration is the adjustment of all DRG weights to reflect changes in relative resource use associated with all existing DRG categories and/or the creation or elimination of DRG categories.

(h) Recalibration of the DRG weights may be done to adopt the most current Grouper version available, or may be done to use more current claims and cost report data, or both. DRG weights will be recalibrated at the discretion of the Division with the approval of the Commissioner of the Department of Human Services.

(i) The DRG weight is multiplied by the hospital's final rate, as described in 10:52-14.6, in order to determine DRG reimbursement.