RAND compares MS-DRGs to commercially available severity-adjustment systems

The RAND Corporation published a report comparing MS-DRGs with the five other severity-adjustment systems that were being considered by CMS. The report is an addendum to RAND’s interim report that was published in March, which evaluated severity-adjustment systems before CMS announced its intention to create MS-DRGs.

The six severity-adjustments systems that were compared with MS-DRGs were:

1. Medicare's current DRG system (CMS-DRGs), which contains 538 DRGs.
2. CMS-DRGs modified for AP-DRG Logic (CMS+AP-DRGs), from 3M Health Information Systems. This system totals 602 DRGs.
   
3. Consolidated Severity-Adjusted DRGs (Con-APR-DRGs), from 3M Health Information Systems. This system is 3M’s All-Patient Refined DRGs with Medicare modifications, and includes 863 DRGs.
   
4. Refined DRGs (HSC-DRGs), from Health Systems Consultants, which utilizes 1,293 DRGs.
   
5. All-Payer Severity DRGs with Medicare modifications (MM-APS-DRG), from Ingenix, which contains 915 DRGs.
6. Solucient Refined DRGs (Sol-DRGs), from Solucient, which totals 1,261 DRGs.
   

According to the report addendum:

• The Con-APR-DRG system explains more cost variation than the others systems but is also the most complex and is likely to impose the highest implementation and ongoing costs. Three CMS-based systems have higher explanatory power than the MS-DRGs; the HSC-DRGs, MM-APS-DRGs, and the Sol-DRGs.
• Each severity-adjusted DRG system improves payment accuracy by redistributing payment from lower-cost discharges to higher-cost discharges.
• Each of the severity-adjusted DRG systems improves upon the explanatory power of the CMS-DRGs. The MS-DRGs explain 43 percent of the cost variation, which is a 9.1 percent improvement over the CMS-DRGs. The explanatory power of the MS-DRGs is higher than the CMS+AP DRGs, but lower than the other systems.

Also within the report were evaluations of the systems by:

• Distribution of DRGs and discharges by severity-level assignments
• Within-DRG cost variation
• Comparative performance in explaining variation in costs
• Assessment of performance, overall and by MDC
• Assessment of performance, by relative costliness of base DRGs
• Validity of the severity-adjusted DRGs

RAND’s addendum to its interim report can be accessed here.

RAND’s interim report can be accessed here.