Client Alerts, News Articles, Blog Posts, & Multimedia

Everything you need to know about BMD and the industry.

What Inpatient Behavioral Health Providers Need to Know About ODM's New Draft Rule for Reimbursements

Client Alert

Ohio Department of Medicaid (ODM) released a draft rule on October 17, 2023, that will transform how inpatient behavioral health services are reimbursed for some hospitals. ODM will migrate inpatient payments for behavioral health and substance use disorder services (BH/SUD) provided by freestanding psychiatric hospitals (FSPs) from the APR-DRG payment methodology to a per diem payment methodology derived from the APR-DRG system.

The draft rule also 1) increases inpatient payments for BH/SUD services provided by FSPs and acute care general hospitals and 2) seeks to improve inpatient cost coverage for FSPs and acute care general hospitals providing BH/SUD services.

Background on DRG and Per Diem Payment Methodologies

State Medicaid programs are required to cover inpatient hospital services, although they have flexibility to determine the payment methodologies for the services they provide. Common reimbursement methodologies for inpatient hospital services include DRGs (diagnosis-related groups), per diems, and cost-based reimbursement. Historically, DRGs have been the most prevalent reimbursement methodology for hospital Medicaid reimbursement; However, many states use an alternative payment methodology – like a per diem – for inpatient behavioral services even when the state uses a DRG methodology for general inpatient hospital reimbursement.

Under the DRG system, hospitals are reimbursed based on the principal diagnosis or condition requiring the hospital admission. The DRG system is designed to classify patients into groups that are clinically coherent with respect to the amount of resources needed to treat a patient with a specific diagnosis. The Centers for Medicare & Medicaid Services assigns a unique weight to each DRG, which reflects the average level of resources for an average patient in the DRG relative to the average level of resources for all patients. In comparison, under the per diem methodology, hospitals receive a fixed rate for each day of inpatient services provided, regardless of a hospital’s charges or costs incurred for caring for that particular patient.

Payors often favor DRG-based payment methods because of their stronger incentives and rewards for shorter stays and reduced costs. For inpatient behavioral health services, however, reducing length of stay often means patients with chronic behavioral health needs are readmitted. Shifting toward a per diem reimbursement methodology theoretically should aim to better cover provider’s costs while ensuring patients stay in the hospital as long as necessary to receive the necessary services.

The Switch to Per Diem Payment

Rather than include the very technical per diem calculation components in this client alert, please reach out to your BMD attorney for more details.

Miscellaneous Rule Provisions

Under the rule, if a hospital paid under the prospective payment system transfers an inpatient to another hospital or receives an inpatient from another hospital, then each hospital is paid a per diem rate for each day of the patient's stay in that hospital, plus capital, medical education, and outlier allowances, not to exceed the DRG maximum.

Additionally, a readmission within one calendar day of discharge to the same institution is one discharge for payment purposes so that only one DRG payment is made. If two claims are submitted, then the second claim processed will be rejected. To receive payment for the entire period of hospitalization, the hospital will need to submit an adjustment claim reflecting services and charges for the entire hospitalization.

Also, the rule increases inpatient payments for BH/SUD services provided by acute care general hospitals. Per diem payment calculations for acute care general hospitals follow the same methodology as payments to FSPs.

Lastly, the rule increases reimbursement for neonate APR-DRGs with major or extreme severity of illness (SOI). The relative weights for neonate DRGs 580-640 with an SOI of major or extreme were increased by five and thirteen hundredths percent to provide enhanced payments for donor breast milk and milk fortifiers. The computation of relative weights for the DRGs is equal to the average inflated cost per case within the DRG/SOI divided by the average inflated cost per case across all DRG/SOIs.

If you have questions about the content of this Client Alert or hospital reimbursement for inpatient behavioral health and substance use disorder services, please contact BMD Healthcare Member Daphne Kackloudis at

Corporate Transparency Act: Business Owners Must Act Now

The Corporate Transparency Act requires all reporting companies to file their Beneficial Ownership Information (BOI) report by year-end to avoid penalties. Companies formed before January 1, 2024, have less than six months to comply. Learn more in a client alert by BMD Member Blake Gerney.

New Medicare Billing Rules: What MFTs, MHCs, and IOP Providers Need to Know

Starting January 1, 2024, Medicare began covering services provided to Medicare beneficiaries by marriage and family therapists, mental health counselors, and Intensive Outpatient Program (IOP) services. With this change, Medicare has become the primary payer for these services.

Chevron Doctrine No More: What the Supreme Court’s Ruling Means for Agency Authority

On June 28, 2024, the Supreme Court invalidated the Chevron doctrine, nearly 40 years after it first took effect.

Ohio Board of Pharmacy Update: Key Regulatory Changes and Proposals You Need to Know

The Ohio Board of Pharmacy (BOP) has rescinded certain OAC rules (OAC 4729:5-18-01 through 4729:5-18-06), removing regulations on office-based opioid treatment (OBOT) clinics. The rescissions took effect on June 3, 2024. The BOP also published a new rule, OAC 4729:8-5-01, which sets explicit reporting guidelines for licensed dispensaries and became effective on June 7, 2024.

LGBTQIA+ Patients and Discrimination in Healthcare

In early April, the Kaiser Family Foundation released a study outlining the challenges that LGBT adults face in the United States related to healthcare. According to the study, LGBT patients are “twice as likely as non-LGBT adults to report negative experiences while receiving health care in the last three years, including being treated unfairly or with disrespect (33% v. 15%) or having at least one of several other negative experiences with a provider (61% v. 31%), including a provider assuming something about them without asking, suggesting they were personally to blame for a health problem, ignoring a direct request or question, or refusing to prescribe needed pain medication.”