The in-patient payment system is a complex calculation which begins with each case being categorized into a diagnosis-related group (DRG). DRG hospital billing system is one which classifies hospital cases into certain groups, referred to as DRGs, which are expected to have similar hospital resource use and hence similar cost. Each DRG has a payment weight assigned to it which may be affected by factors such as cost of living.

The DRG payment system has been used in the United States since 1983. Although there is more than one DRG system being used depending upon the payer, only the Medicare severity (MS-DRG) system is accepted by Medicare. Elements of the MS-DRG system have also been adopted by various other payers.
 
Encompassing 20 body areas and gathered into around 500 groupings, MS-DRG structure is based on severity of illness and risk of mortality.  The DRGs are determined based on the ICD-10-CM primary diagnosis and procedure codes assigned to the case. Other factors such as age, sex, discharge status and the presence of complications or comorbidities are also used to determine the appropriate DRG on a case-to-case basis.

Three tier arrangement of most DRGs    

As the specificity of diagnosis and intensity of treatment increase, the DRG payment for an in- patient bill also rises. Leister and Stausberg revealed that neglecting to consider disease risk and inappropriate coding leading to lesser DRG grouping, can cause hospitals to lose valuable resources and revenue when delivering care to high-risk patients and those with severe illnesses. This may inspire a shift from traditional inpatient to outpatient line of care, as a cost saving measure.

On the other hand, inflated DRG grouping, that is, when the submitted codes can result in larger reimbursements than would be consistent with the actual condition, cannot just lead to denials but also call for unnecessary audits. Hsia et al. (1988) identified the rate of DRG coding errors to be 20.8%, in a study of 239 hospitals under the Medicare program, of which 61.7% significantly favored the hospital. The discrepancies between submitted codes and the information in medical records, even though not deliberate can trigger concerns about quality of medical records, cooperation of physicians, knowledge and skill of coders, as well as hospital intentions to "game the system" (also known as "DRG Creep").

Thus, it is imperative to implement a suitable process for DRG hospital billing to ensure that the most appropriate codes are submitted and that the record clearly supports all codes reported, serving to raise the DRG with clinical evidence and maximize reimbursement, at the same time reduce denials and prevent chances of audits.

Purpose of DRG:

At CureMed Solutions, our experienced coding professionals with formal training of DRG coding and DRG billing guidelines, assign codes based on the principal and secondary diagnoses, procedure, discharge status, age and sex that describe the patient’s conditions, complications and co-morbidities. Our DRG coding and CDI teams work together proactively towards achieving accurate DRG coding and strengthening of record content, striving to perform exceptionally while maintaining compliance, abiding by ethical and approved DRG coding guidelines.

Read more about ICD-10 Updates CY 2022.