MS-DRG Classification System

Posted on March 16, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

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Upgrading the DRG Scheme of the Mid-Nineties

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Dr. DEMThe Centers for Medicare and Medicaid Services [CMS] just adopted as final its proposal to restructure the older 538 Diagnosis-Related Groups (DRGs) to 745 new MS-DRGs (Medicare Severity-adjusted Diagnosis Related Groups) to better recognize severity of patient illness. 

According to the CMS and the consulting RAND corporation, the newer MS-DRGs more accurately capture resource utilization by splitting the large number of former DRGs into three different categories based on the presence or absence of diagnoses classified as “major complication or co-morbidities” (MCC), “complications or co-morbidities” (CC), or “without MCC/CC” (Non-CC). 

Phase-In Period 

The MS-DRGs will be phased in over a two-year period, rather than at one time, as originally proposed.  

  • For the first year of the transition (FY 2008) half of the relative weight for each MS-DRG will be based on the current DRG relative weight and half will be based on the new MS-DRG relative weight.
  • For the second year (FY 2009), the relative weights will be based entirely on the MS-DRG relative weight.  

IPPS and Budget Neutrality

CMS adopted its proposal to reduce the In-Patient Prospective Payment System [IPPS] standardized amounts by 4.8% to maintain budget neutrality and account for expected changes in coding and documentation.  

Instead of applying a 2.4% adjustment over a two year period as proposed, CMS will apply an adjustment of -1.2% for FY 2008 and based on current projections will apply adjustments of -1.8% each year to the IPPS standardized amounts for FYs 2009 and 2010. 

Assessment 

The final rule will implement Section 5001(c) of the Deficit Reduction Act of 2005 (DRA), which requires the secretary to select at least two conditions that are (a) high cost or high volume or both, (b) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis, and (c) could reasonably have been prevented through the application of evidence-based guidelines by October 1, 2007.

Conclusion

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