A More Precise Diagnosis Delivers a Higher Reimbursement
A Medicare Severity-Diagnosis Related Group (MS-DRG) is a system of classifying a Medicare patient’s hospital stay into various groups in order to facilitate payment of services.
The general DRG system was created collaboratively through Yale University’s Schools of Management and Public Health in order to classify the care that hospitals provide by separating all of the potential human disease diagnoses into 20+ body systems, and then subdividing those systems into 450+ groups. Fees are assessed by factoring the body system and groups affected, with the amount of hospital resources required to treat the condition. The result is a fixed rate for patient services known as DRG.
In 1987, the DRG system split to become the All-Patient DRG (AP-DRG) system which incorporates billing for non-Medicare patients, and the (MS-DRG) system which sets billing for Medicare patients. The MS-DRG is the most-widely used system today because of the growing numbers of Medicare patients. Payments are calculated using wage variations, geographic locations, and the percentage of Medicare patients that a hospital treats.
MS-DRG Offers More Precise Diagnosis
The system has expanded the number of DRGs to about 750 to facilitate a potential increase in diagnosable services, and provides better recognition of the severity of illness than the traditional CMS DRG system. (CMS stands for the Centers for Medicare and Medicaid Services.) For example, the DRG for the principal diagnosis congestive heart failure is DRG 127. In the MS-DRG system, hospitals may choose from three new DRGs depending upon the secondary diagnoses reported.
The two-tiered system that allowed hospitals the choice of a secondary diagnosis has now become a three-tiered system. For example, a secondary diagnosis may now expand from a choice of the following two structures — complication/co-morbidity (CC) or no complication/co-morbidity (non-CC.) The expansion includes a third new structure — major complication/comorbidity (MCC.)
In short, the Medicare Severity-Diagnosis Related Group (MS-DRG) system enables the Centers for Medicare and Medicaid Services (CMS) to provide increased reimbursements to hospitals serving more severely ill patients. Hospitals treating less severely ill patients will receive less reimbursement.
Transfer Patients
Hospitals will receive adjusted reimbursement if Medicare patients are transferred to another acute-care facility or to a post-acute care facility. For patients transferring from one acute-care facility to another, the hospital that transfers the patient is paid an MS-DRG-based per-diem rate. The receiving facility receives the full Medicare Severity-Diagnosis Related Group payment.