Understanding UCR Inpatient Fees

by  Wyn Staheli, Director of Content - innoviHealth
Sep 17th, 2025

Find-A-Code uses Usual, Customary, and Reasonable (UCR) fees as established by the Veterans Administration (VA) to help determine the amount paid for inpatient medical services based on the diagnosis and the geographic area. This article addresses information and pricing for facility fees based on Diagnosis Related Groups (DRGs). The UCR rates included in FindAcode.com come directly from the VA and are divided up into varying per diem (daily) rates as defined by the VA. Be aware that different payers may have different payment methodologies as defined by individual contracts.   

Per-Diem

A facility per diem rate is a fixed daily rate reimbursed by an insurance company for patient care received at certain types of healthcare facilities (e.g., hospital, skilled nursing facility). Instead of paying separately for each service or supply, the insurer pays one set daily rate that covers most routine services, nursing, and overhead during the stay. Specialized procedures, medications, or high-cost items may be billed separately depending on the terms of the payer’s contract with the provider. Per diem rates are a “per day amount” which is different from Medicare’s MS-DRG system in which payment is based on DRGs where the facility is paid a lump sum or flat rate for the entire hospital stay based on the patient’s diagnosis and severity regardless of the length of stay (e.g., 2 or 10 days it is the same). 

VA Methodology

According to the Federal Register, when it comes to facility reimbursement, the “VA uses a per diem methodology, under which there are separate per diem charges for room and board and for all ancillary services. VA then sends the third-party payer the bill using the per diem methodology.”

There are different levels of facility care and according to 38 CFR § 17.101 there are different payment formulations based on those levels that vary by geographic area and by DRG. The information provided below comes directly from the law in relation to VA payment for medical care or services provided or furnished to a veteran for a non-service connected disability:

• Acute inpatient facility charges: Add together per diem charges for room and board (either standard room or ICU room) PLUS the ancillary services per diem rate; generally, acute care is defined as a level of health care in which the patient's severity of illness and intensity of service can only be performed in an inpatient setting (e.g., heart attack, stroke, major trauma)

• Skilled nursing facility/sub-acute inpatient facility charges: per diem charges only; includes “room and board (private, semi-private, and ward), physical therapy, occupational therapy, inhalation therapy, speech-language pathology, pharmacy, medical/surgical supplies, and “other” services”. 
• Partial hospitalization facility charges: per diem charges only; typically includes all care received during the stay (e.g., therapy, pharmaceuticals)

NOTE: Payers often have clauses about what specialized services are not considered bundled into the per diem rate. It is CRITICAL to review your contract to see which services may be billed separately according to that payer.

FAQs

I split the first question into two.

Question:

Are the Ancillary charges in addition to the other per diem rates?

Answer:

According to 38 CFR § 17.101, which is for VA payment calculations, it depends on the type of patient encounter. If this is for an acute in-patient stay, yes, you can report both the ancillary per diem rate AND the per diem rate for either an ICU or standard room depending on where the patient is located.. If this is for either a skilled nursing facility/sub-acute inpatient facility or a partial hospitalization, the ancillary charges are bundled  in the per diem rate. However, payers may have policies allowing certain specified ancillary services which may be billed separately. So the answer depends on the rules of the individual payer.

Question:

If the VA is basing the cost for an in-patient stay on MS-DRGs then are they following the Length of Stay (LoS rules)? 

Answer:

The easy answer is “Yes.” According to 38 CFR § 17.101, The VA uses Medicare MedPAR (Provider Analysis and Review file) and commercial claims data to determine the average length of stay for each type of admission. Both datasets provide LoS benchmarks — MedPAR uses the geometric mean length of stay (GLOS) for each MS-DRG. They start with a per-admit cost amount (based on MS-DRG relative weights applied to VA/Medicare/Commercial cost data).

Separate per diem rates are set for Room & Board (R&B), ICU Room & Board (ICU R&B), and Ancillary Services. Each is adjusted separately using LoS rules. Because MS-DRGs are case-based (flat payment regardless of LoS), VA needed a way to change that flat payment into a per-diem. This was done by dividing the case-based charge by the LoS. In other words, shorter stays have a higher per diem and longer stays have a lower per diem, but total charges are capped at the case-level amount so you don’t exceed the DRG-based value. That per-admit amount is then divided by the average LoS (MedPAR GLOS and Commercial LoS) to calculate a per diem rate.

Question:

DRG 469 has 3.5 Geometric Mean LoS and  5 Arithmetic Mean LoS, so is the per diem based on per day or the DRG LoS 3.5?  

Answer:

The VA uses a rather complicated formula (as described in the question above) which uses many factors (including LoS) to arrive at their per diem rates which are tied to DRGs. But remember that their per diem rates work differently than MS-DRG payments by Medicare which is a single capitated payment..

Question:

RE: the ancillary fees — is this only a one-time charge per stay? Based on the LoS (and not daily room and ancillary services)?

Answer:

When a patient is currently admitted for an ACUTE inpatient stay, the ancillary fees associated with that stay may be reported separately on a daily basis using the “Ancillary services per diem rate,” which by definition is a daily rate. It is not a one time, flat rate charged for the entire stay. However, the ancillary services provided at a skilled nursing facility/sub-acute inpatient facility and a partial hospitalization facility are included or bundled into the per diem rate and the “Ancillary services per diem rate” is not charged separately. The VA uses a formula that includes the LoS to arrive at the ancillary services per diem rate (see the question above for the formula). 

This answer is based on VA regulations. Be aware of individual payer policies which may be different.

Question:

Can you add standard room to ancillary fee payment rates?

Answer:

If the patient is admitted for an ACUTE inpatient stay, you can add either the standard room or ICU room per diem rate (depending on the room) to the “ancillary fees per diem rate.” If the patient is admitted to an SNF or partial hospital facility, then the “ancillary fees per diem rate” is NOT reported.

This answer is based on VA rules. However, payers may have policies allowing certain specified ancillary services which may be billed separately. So the answer depends on the rules of the individual payer.

Further Assistance

If you still have questions on these subjects or others and how they relate to the payment systems established by the VA, please visit the VA website.