Some commercial payers using MS-DRGs

According to first-hand reports I have received, a handful of commercial payers will begin using MS-DRGs for discharges on or after Oct. 1 to reimburse providers for non-Medicare business.

One challenge for commercial payers using MS-DRGs is that the new reimbursement system does not have pediatric break-outs (patients age 0-17, and mother/baby). Most of the payers that plan to switch to MS-DRGs are reimbursing providers with newborn and maternity cases under fixed or per-diem rates. For the pediatric cases the providers are being reimbursed under MS-DRGs. Check out a previous post on the impact of this issue.

In another scenario, one payer instructed its providers to bill under MS-DRGs starting Oct. 1, but is paying its providers on a percent-of-charge basis. This payer plans to maintain this practice until the end of year when it can renegotiate its provider contracts to use MS-DRGs. Currently, the payer’s existing provider contracts detail how it pays for a specific list of v24 DRGs, and includes a clause that all DRGs not on that list are paid at a percent of charge. Under the contract, the payer considers MS-DRGs to not be on that list, so the payer is reimbursing its providers with a percent-of-charge payment.

Contact me at David.Hochheiser@ingenix.com if you know of payers that have switched to MS-DRGs, or if you learn of any unique ways that payers have applied MS-DRGs.