What is a diagnosis-related group [DRG]?
A diagnosis-related group [DRG] is a case-mix complexity system implemented to categorize patients with similar clinical diagnoses in order to better control hospital costs and determine payor reimbursement rates. For example, Medicare pays out a set amount based on a patient’s DRG as opposed to reimbursing the hospital for its total costs. This method encourages the hospital to minimize care costs.
Why are diagnosis-related groups [DRGs] important in healthcare?
The DRG system provides a structural framework for CMS to begin promoting higher quality of care standards throughout the U.S. healthcare industry. DRG continues to encourage hospitals to improve treatment efficiency and disincentivizes the over-treatment of patients for higher reimbursement rates which had become standard practice.
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Terms in this set [31]
IPPS
inpatient prospective payment system
MS-DRGs
Medicare severity diagnosis groups [MS-DRGs].
DRGs
In 1983, the government enacted the system using diagnosis related groups [DRGs] as the payment methodology. The theory is based upon patients with similar characteristics consuming similar resources. Determining how patients are similar is a key factor for the system, which defines the similarities by the DRGs.
The system was created by Medicare; however many other larger payers have implemented a DRG system, such as Tricare, Medicaid, and Blue Cross. The other commercial payers are not required by regulation to follow Medicare's system exactly but many choose to follow their system. A billing professional working in a hospital should learn if their payers are using a DRG system in addition to knowing if they follow Medicare's logic.
against medical advice:
A type of discharge status in which a patient chooses to leave the facility even though all medical personnel recommend the patient stays for treatment.
discharge status:
When patients who were considered inpatients at healthcare facilities leave the facility to go to another location. The status indicates the new location of the patient. For example, a patient returns home to his/her house after being treated at their local community hospital.
case mix index [CMI]:
The sum of all MS-DRG weights, divided by the total number of Medicare discharges for the same time period. Slight increases or decreases impact a hospitals overall reimbursement amount. Facilities routinely monitor the CMI.
CC:
Abbreviation for complications and comorbid conditions.
comorbid condition:
A pre-existing condition which, because of its presence, causes an increase in length of stay by at least one day in approximately 75% of the cases.
complication:
A condition that arises during the hospital stay which prolongs the length of stay by at least one day in approximately 75% of the cases.
grouper:
A software program designed to determine MS-DRGs and typically contains Medicare code edits.
hospital wage index:
A numeric factor defined by Medicare that considers the geographic location of hospitals. This factor is used in the reimbursement calculations for facilities to account for geographic differences.
major complication/comorbid condition [MCC]:
Complications and comorbid conditions defined by Medicare to have a higher severity of illness impact on a patient.
major diagnostic category [MDC]:
A broad classification of conditions typically grouped by body systems diseases.
medicare code edits:
A method to identify various situations based upon assigned ICD-10-CM codes. For example, the sex conflict edit identifies situations when a female only diagnosis code is on a claim indicating the patient is a male.
non-operating room procedure:
Procedures which may or may NOT be performed in a surgical operating suite; however, the procedure codes affect MS-DRG assignment.
operating room procedure:
Procedures identified as requiring the use of an operating room suite. The identified codes influence MS-DRG assignment.
outliers:
Hospital cases with specific circumstances that place the admission extremely outside the normal or average admission. For example, high cost outlier is when the patient's hospital charges are high and above the average charge for a similar case. Additional payment may be received for such outliers.
per diem rate:
A set payment amount to a facility for each day the patient stayed at the facility. For MS-DRG purposes, the amount is paid to the facility that transferred the patient.
pre-MDC
Categories established by Medicare where cases are automatically assigned without applying all the MS-DRG logic. These cases are usually high-risk, lower volume admissions, such as organ transplants.
principal diagnosis:
Condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.
principal procedure:
Procedure performed for definitive treatment rather than diagnostic or exploratory; or to treat a complication. This procedure is typically related to the principal diagnosis.
relative weight [RW]:
A number assigned to each MS-DRG reflecting an average patient's resource consumption. The higher the number value represents greater resources used to care for the patient. This number is used in calculating the MS-DRG reimbursement amount a facility receives. The higher the RW, the higher the reimbursement amount received.
surgical heirarchy:
Ordering of surgical cases from the most to least resource intensive.
transfer:
A type of discharge status where a patient is moved from one facility to another facility. A patient may be moved to many different types of facilities, such as to skilled nursing facility, or another acute care facility. There are different discharge status codes to assign depending upon the type of facility.
volume:
The number of patients in each MS-DRG. The volume of patients in specific DRGs is important when reviewing the case mix index.
six factors that influence the assignment of DRGs:
Before applying the remaining logic there are six factors that influence the assignment of DRGs:
1. principal and secondary diagnosis and procedure codes
2. sex
3. age
4. discharge status
5. presence or absence of major complications and comorbidities [MCCs]
6. presence or absence of complications and comorbidities [CCs]
HAC
It should be noted that hospital acquired conditions [HAC] also factor into the assignment of MS-DRGs. Basically, these are codes that identify conditions that are high cost, high volume, or both; they may also be CCs or MCCs. Most importantly, they could have been reasonably prevented through the application of evidence-based guidelines. The point of this notification is that if the condition IS NOT PRESENT ON ADMISSION, it will NOT be grouped to that higher-paying MS-DRG. Review any code assignments that are designated as HAC. Accurate and complete documentation is essential. Most facilities have a physician-led review committee to investigate and develop additional preventative measures.
formula for relative weight
MS-DRG relative weight x facility base rate = dollar reimbursement
wage index
The wage index is the method used to account for geographical cost of living differences.
Outliers
the payment is an additional payment to account for the admission being statistically significant away from the average.
New technology add-on payments
New technology add-on payments are additional payments for specific technology Medicare has identified as new. The additional payment is to account for the increased cost associated with obtaining the technology.
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