Medicare Severity-Diagnosis Related Group Case Study

Coding systems are used in the inpatient and outpatient settings for the classification of patient morbidity and mortality information for statistical use. The World Health Organization (WHO) developed the Ninth Revision, International Classification of Diseases (ICD-9) in the 1970s to track mortality statistics across the world. The International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM), is the adaptation the U.S. health system uses as a standard list of six-character alphanumeric codes to describe diagnoses. Globally utilizing a standardized system improves consistency in recording symptoms and diagnoses for payer claims reimbursement, as well as clinical research, and tracking purposes.

The knowledge base for DXplain contains more than 65,000 relationships between diseases and patient descriptors (or clinical manifestations). The format for these relationships and the data structures are similar to the format and data structures used in the INTERNEST/QMR system except that in DXplain terms cannot only support a given diagnosis, but can also contradict other diagnoses. The relationships in DXplain are concerned with three different elements: 1) term importance, 2) term frequency and 3) term-evoking power. Term importance is used to express how significant the particular term is in indicating the presence of disease. A high term importance is given to findings that can be identified with high reliability or are rarely found

The reimbursement method used at St. Anthony’s hospital is quite distinct depending on the party doing the payments. Payments are received from Medicare, Medicaid, private insurers and also directly from patients. The party responsible for Medicare payment is the Federal government and it offers payment mainly for the elderly. With the Medicare payment, hospitals receive a flat fee depending on the case. According to Gee (2006), most hospital revenue has declined because of the revised payment set by the Diagnosis-Related Groupings. The fee for most cases varies according to the Diagnosis-Related Group (DRG) it can be classified under. For example, Medicare pays only a fixed amount for an elderly patient suffering from pneumonia regardless

Since 1984, Medicare patients have been serviced under the prospective payment system of the Medicare program. Under this system, primary care providers are reimbursed for their services using a fixed payment for each patient that is determined by the patient’s diagnosis-related group at the time of the admission. Therefore, under the prospective payment system a hospital’s reimbursement is unaffected by the actual expenditures that are required to care for a patient.

CMS preformed a comprehensive review of all diagnosis codes to determine which codes should be classified as CCs when present as a secondary diagnosis. CMS then categorized these diagnosis codes into the different severity levels. CMS also consolidated the CMS DRGs into a new set of base DRGs and then divided each into severity subclasses or MS-DRGs.

| Prospective Payment System (PPS) first began in 1980 with a small number of hospitals partitioned into three groups according to their budget positions---breakeven, surplus, and deficit--- prior to the imposition of DRG payment (Diagnosis- related group). The PPS as DRG’s had been designed to limit the share of hospital revenues derived from the Medicare program budget, and in spite of doubtful results in New Jersey, it was decided in 1983 to impose DRG’s on hospitals nationwide.

Enrolled patients use the global payment system. This means each member provides a fixed fee per month or year, irrespective of the amount of services

Quality physician documentation is not only essential to providing superior clinical communication, but also allows for the delivery of useful data that “supports quality metrics, acuity of care, billing, and accurate representation of medical conditions” (Rosenbaum et al., 2014). The Centers for Medicare and Medicaid Services (CMS) uses a system to classify Medicare patient’s hospital stays into various groups in order to facilitate payment of services called Medicare Severity-Diagnosis Related Group (MS-DRG). Some payers also use all patient refined (APR)-DRG reimbursement systems. MS-DRG groups are outlined by a specific collection of patient characteristics which include areas specific to the “principle diagnosis, specific secondary diagnoses,

“The Tax Equity and Fiscal Responsibility Act (TEFRA), signed into law September 3, 1982, mandated the development of a prospective payment methodology for Medicare reimbursement to hospitals.” http://sunlightfoundation.com/blog/2009/09/08/slug/. It changed Medicare reimbursement from a fee for service to prospective payment system. Which is where there`s a reimbursement method where`s there an amount of payment determined in advance of services being performed. The rates are done annually. Reimbursements for inpatient care by a classification scheme called diagnosis-related groups. If the patient might have to stay longer in inpatient care more than average days, the hospital may lose money on that patient.

We've had some major news stories about MA Plans overcharging lately. What exactly are they about?

The Inpatient Prospective Payment System is based on CMS (Medicare) standards because it is the largest reimburser. It was created to control rising healthcare costs by determining reimbursement prospectively. The costs of inpatient acute hospitals stays under Medicare Part A are fixed so that each patient case aligns with a Diagnosis Related Group (DRG).

An accurate and specific documentation of universally accepted set of codes are important for the protection of healthcare providers as well as increased reimbursement for services received. These codes are for the validation of which services the patient received from their health care provider ( (Page, 2009). Having the correct codes in place insures the provider with the information needed by the health insurance carrier. Maintained by the AMA (American Medical Association), this universal numeric assignment is also used for developing guidelines for medical care review as well as data collection for medical education and research (Scott, 2013).

In the first model, the episode of care is the length of time the inpatient stays in the acute care hospital. Medicare pays the hospital a discounted payment based on the payment rates established under the Inpatient Prospective Payment System (IPPS), which starts at zero percent for the first six months and then rises to a minimum of two percent in the third year, based on the IPPS. Physicians are paid under the Medicare Physician Fee Schedule. Hospitals and physicians are to share in any costs. This model benefits Medicare patients by reducing their costs, but not hospitals and physicians because they must share in any expenditures. The second model, which is also based on IPPS, is different from the first model because it includes inpatient and post-acute care from either 30 or 90 days following discharge. This bundled payment includes physicians’

In 1983, the Medicare prospective payment program was implemented which allowed hospitals to be reimbursed a set payment based on the patient’s diagnosis, or Diagnosis Related Groups (DRG), regardless of what treatment was provided or how long the patient was hospitalized (Jacob & Cherry, 2007). To keep the costs below the diagnosis related payment, hospitals had to manage efficiently the treatment provided to a client and reduce the client’s length of stay (Jacob & Cherry, 2007). Case management, or internal case management “within the walls” of the health care facilities was created to streamline costs while maintaining quality care (Jacob & Cherry, 2007).

➤ Diagnosis classification system developed by the Centers for Disease Control and Prevention for use in all U.S. health care treatment settings. Diagnosis coding under this system uses 3–7 alpha and numeric digits and full code titles, but the format is very much the same as ICD-9-CM