§ 412.312 Payment based on the Federal rate.

(a) General. The payment amount for each discharge based on the Federal rate determined under § 412.308(c) is determined under the following formula: [Federal rate × DRG weight × Geographic adjustment factor × Large urban add-on × (1 + Capital disproportionate share adjustment factor + capital indirect medical education adjustment factor) × (for hospitals located in Alaska and Hawaii, a cost-of-living adjustment factor)] + (Any applicable outlier payment).

(b) Payment adjustments—(1) DRG weights. The relative resource requirements of the discharge are taken into account by applying the DRG weighting factor that is assigned to the discharge under § 412.60.

(2) Geographic adjustment factors—(i) Local cost variation. A geographic adjustment factor is applied that takes into account geographic variation in costs.