MS-DRGs may result in 6% pediatric reimbursement increase

In the past few months since the proposed rule was released, we at Ingenix have encountered a number of questions about how the change would affect reimbursement for pediatric patients. So we decided to turn some of our number crunchers for some answers. Based on an Ingenix analysis of 2.5 million claims, we found that if MS-DRGs were adopted by non-Medicare payers, payments could increase by almost 6 percent for all pediatric discharges.

That’s not small change, folks.

Many state Medicaid, workers compensation and no-fault programs, and many commercial hospital contracts, are based on Medicare DRGs. These programs will likely be evaluating the new MS-DRGs for potential adoption. One of the main areas of concern for these non-Medicare payers will be the effectiveness and financial impact of the MS-DRGs on the pediatric (non-newborn) population.

In creating the proposed new MS-DRGs, CMS eliminated all age splits, so that except for the neonatal DRGs, there are no MS-DRGs defined specifically for pediatric patients. In the current Medicare DRGs, there are forty-three DRGs that are specifically for patients ages 0 to 17. Pediatric patients that do not fall into one of these forty-three DRGs are treated the same as any adult claim, and are assigned to whatever DRG is appropriate based on the clinical and demographic data on the claim.

My colleague, the brilliant David Hochheiser, assembled a large database of statewide all-payer claims (19.7 million discharges in 14 states, for 2005) and analyzed the non-obstetric, non-neonatal claims for all non-Medicare patients ages 0 to 17. For this dataset of 2.5 million pediatric claims, he assigned the current DRGs and weights, as well as the proposed MS-DRGs and proposed MS-DRG weights.

Based on Dave’s analysis, it appears that non-Medicare payers with significant pediatric coverage may need to seriously consider other severity-adjusted DRG systems designed specifically for the younger (non-Medicare) population, or--at a minimum--calculate their own weights for the MS-DRGs. When he compared, for all pediatric discharges, the current DRG weight with the MS-DRG casemix index as defined by the proposed MS-DRG weights, he found an overall increase of 5.9 percent in reimbursement for all pediatric discharges.

The full results of Dave’s analysis are listed in the table below. The top forty-three rows show the pediatric discharges assigned to those forty-three current Medicare DRGs which were specifically identified for the pediatric population. Here we see dramatic increases in case weights. The last row prior to the totals summarizes all other pediatric cases--that is, those cases that group to non-pediatric DRGs under the current system. The list below is ranked based on volume--that is, the top listed DRG (bronchitis and asthma) is the most frequent in our pediatric database, based on number of discharges.