The Diagnosis Related Group (DRG) model is how the vast majority of inpatient hospital discharges are paid.
The two main DRG types are:
APR-DRG: All Patient Refined Diagnosis Related Group
MS-DRG: Medicare-Severity Diagnosis Related Group
DRGs were created by researchers at Yale in the 60's to study utilization across hospitals.
Medicare started using DRGs in 1983, adopted the current MS-DRG model in 2007 and 12 state Medicaid programs pay by the MS-DRG model.
APR-DRGs were created in 1990 and is currently owned by 3M and 31 state Medicaid programs use this model for payment.
About 55% of pediatric discharges in the country are paid by Medicaid.
Some commercial payers also pay by the APR or MS DRG model.
How is the DRG created?
Clinicians document, hospital coders read the entire medical record, and enter the variables seen in the attached slide into a computer software program that then creates the APR or MS DRG and severity level.
Each DRG and severity level has a relative weight (RW) assigned to it. The RW is like a scale that ranks that highest resource intensity patient (based on charges) to the lowest. The higher the RW, the higher cost of care, acuity, longer expected length-of-stay and higher the payment.
Hospital payment is calculated by multiplying a base rate by the relative weight.
Base rate can vary by hospital and state and other multipliers or policy adjustors can be added to the formula to create higher payments for certain ages, high-medicaid hospitals, rural hospitals, etc...
That payment (RW x base rate) is the entire one-time payment for the hospitalization regardless of the length-of-stay or what happened to the patient during the hospitalization in terms or studies done and treatments provided.
There can be additional "outlier" payments for very high cost cases, but the majority of cases don't qualify for outlier payments. Hospital charges can play a part in DRG payment in determining outlier status but don't play any part in non-outlier cases.
The biggest factor in hospital payment and severity-adjustment is the number and types of diagnoses supported by the record, documented, and coded.
Clinical Documentation Integrity (CDI) programs exist to ensure the medical record and coding of the case reflects the true acuity of the patient. More diagnoses accurately documented, the higher severity-ranking and hospital payment.
In the slides, you can see the DRG calculation method, an example of some APR-DRGs and their relative weights from California's Medicaid program and then hospital payment calculations for bronchiolitis, a very common admission diagnosis in pediatrics.
Note the difference in payment between a hospital in CA and Texas for the exact same diagnosis and severity and the financial impact of a CDI query raising the SOI from a 2 to a 4 (highest SOI)
Contact Pediatric Resource Group (PRG) to develop or optimize your CDI program
#CDI #pediatrics #revenuecycle #aprdrg #msdrg
