Effective Coding Protocols Will Allow Hospitals To Benefit from New MS-DRGs

Hospitals across the nation likely are busy determining what Medicare’s imminent move to severity-adjusted DRGs means to them. Those that understand the specifics of the proposed rule and take steps to improve the completeness and accuracy of their coding will be well-prepared whenever the change occurs, according to an Ingenix expert.

Under the a proposed rule published May 3 in the Federal Register, the Centers for Medicare & Medicaid (CMS) would replace the 538 Diagnosis-Related Groups (DRGs) with a new set of 745 Medicare Severity-adjusted DRGs (MS-DRGs). The change—part of a long-term inpatient prospective payment system (IPPS) reform plan—is being made “to better recognize the severity of illness among patients,” CMS states.

The CMS proposal offers two significant advantages to hospitals, according to Ingenix Senior Vice President Dean Farley: (1) the system that CMS is proposing will do a much better job of allocating Medicare dollars to care areas where the industry needs them; and (2) the proposal creates strong incentives to improve the accuracy and completeness of coding.

“Long term, this is a tremendous win for everyone, because hospitals will have better clinical information to drive patient care and assess whether resources are being used appropriately to treat patients,” Farley says. “Ingenix is extremely supportive of what CMS is trying to do.”

CMS’ long-range plans to better allocate resources

CMS is reforming the IPPS in response to the recommendations of the Medicare Payment Advisory Commission (MedPAC). In a 2005 report, MedPAC recommended that the DRGs be revised to take into account severity of illness and to apply hospital-specific relative value cost weights to DRGs.

The MS-DRGs will enable CMS to provide greater reimbursement to hospitals serving more severely ill patients; conversely, hospitals treating fewer severely ill patients will see reduced reimbursement. MS-DRGs are transparent and available on the same terms as the current DRGs through the National Technical Information Service.

As of October 1, hospital information management (HIM) and finance departments must have systems in place to assign MS-DRGs properly. “Hospitals will need to be a little more careful in their coding and billing practices to capture the revenues they are entitled to,” according to Farley.

While it is unlikely that hospitals will have to make major changes to their computer systems, HIM departments will need to address software commands that are based directly on old DRG numbers. For example, Farley explains, DRG 470 currently represents an “ungroupable” service that does not get reimbursed; many software programs are designed to automatically ignore claims bearing the DRG 470 code. Under the proposed MS-DRG, code 470 represents “major joint replacement or reattachment of lower extremity without MCC.” The “ungroupable” DRG is now 999.

CC list revisited after 24 years

As part of the proposal, CMS also reevaluated the complication and co-morbidity, or “CC” list, which had not been revised since 1983. CMS proposes eliminating all pediatric splits as well as current CC splits and other diagnosis-driven complexity splits, and proposes consolidating a number of clinical areas with low volume. The MS-DRGs include a base set of 335 DRGs, which may be further refined by CC and major CC criteria.

“The presence of a CC should have a material impact on the cost of care for a particular case,” Farley says. “CMS has gone through the base DRGs and systematically looked to see where the severity levels worked to explain resource use.”

Preparing for MS-DRGs

To prepare for the new MS-DRGs, Farley recommends that hospital administrators begin with a careful reading of the proposed rule, and then analyze recent claims history.

“I would want to know how the changes will affect me and which cases in my hospital are at specific risk for reduced reimbursement,” Farley says.

Farley also suggests that hospitals look at product lines and clusters of DRGs where “it looks like you are taking a dramatic hit,” and identify opportunities to improve coding in both those areas and across the entire coding process.

Ingenix—with its history of improving revenue and coding outcomes for hospitals—also can help hospitals further understand what the proposed rule will mean for them and what actions they can take now to mitigate any risks or areas of vulnerability imposed by the proposed rule.

“We can help hospitals solve problems and help them get what they are entitled to under the proposed rule,” he says. “The accuracy and completeness of coding—not only for Medicare but for all claims—can make a big difference in reimbursement. We can also help the medical staff understand the changes that are headed their way.”

External audits, better documentation are changes worth making now

A major element of the Ingenix revenue cycle management program involves external audits, which ideally should begin now to help implement the use of the best protocols when new MS-DRG codes are put in place.

Ingenix also helps hospitals improve their clinical documentation by placing HIM professionals on-site to advise the coding staff about how to document cases in a way that can drive revenue. “We can do focused data analyses, in real time and with the hospital’s own data, to hit the ground running,” Farley says.

In addition to its audit and clinical documentation programs, Ingenix offers a complete suite of product offerings that will assist hospitals with the MS-DRG transition: analytics/decision support (HospitalBenchmarks.com); publications (Severity-DRG Implementation Guide, DRG Expert and DRG Desk Reference); and consulting services (education workshops, coding workshops and impact analyses).

To learn more about Medicare’s move to severity-adjusted DRGs, visit the S-DRG Report on Ingenix.com. To learn more about how Ingenix can help hospitals prepare for this significant change, call 866-222-1298.

Comments on the proposed rule may be submitted by June 12; a final rule is expected this summer.

References:

Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2008 Rates, Proposed Rule, May 3, 2007 (72 FR 24680)

“Report to the Congress, Physician-Owned Specialty Hospitals,” MedPAC, March 2005.