1. Cost per day derived by dividing total costs by the number of inpatient days of care given. Per diem costs are an average and do not reflect the true cost for each patient. 2. Phrase used in managed care plan contracts that refers to reimbursement made to the hospital from which a patient is transferred for each day of stay. The formula for determining the per diem rate is to divide the full diagnosis-related group (DRG) payment by the geometric mean length of stay (GMLOS) for the DRG. The payment rate for the first day of stay is twice the per diem rate, and subsequent days are paid at the per diem rate up to the full DRG amount. 3. In a managed care plan, contracted amount paid for an inpatient that is calculated per day per type of stay.