Inpatient Reimbursement

Although charges for medications and pharmacy services are a focus for pharmacy managers, they are typically not the payments received by the hospital. Most inpatient care is paid at a "case rate." A case rate is a payment that is negotiated based on a diagnosis-related group, a per diem (daily) amount, or other benchmark method to determine the hospital’s payment. The hospital receives the case rate payment for the patient’s care, irrespective of the individual charges posted to the patient’s account. Some hospital contracts pay a discounted percentage of billed charges, and most payers provide supplemental payments for patients whose care substantially exceeds the negotiated amount. However, almost no payer, including the federal government, pays full charge. Patients without insurance often are unable to pay their hospital bill requiring the hospital to "write off" their bill and consider the cost of care as a charitable loss.

Outpatient Reimbursement

Outpatient prescriptions are typically charged in the same fashion. The pharmacy contracts with a third party (insurance provider, state Medicaid program, or Pharmacy Benefits Manager) to fill prescriptions at a fixed rate based on medication costs and service fees. Rate structures are typically based on a percentage of average wholesale price for the medication plus a fee.