Paying by numbers

CMS's new MS-DRG codes require more precise diagnostic reporting.


When CMS announced revisions to its payment structure last year, its plan to stop paying for certain hospital-acquired conditions received a lot of attention. But the agency also proposed another important change: basing reimbursement more closely on disease severity.

Under the new system, which took effect Oct. 1, 2007, Medicare has replaced its old list of 538 DRGs with a much more complex list of 745 inpatient conditions—Medicare Severity DRGs, or MS-DRGs—that require greater diagnostic accuracy and include three levels of severity:

  • A base level or “non-CC” level for cases with no complications or comorbidities,
  • A second level, labeled CC, that includes routine complications, and
  • A third level, labeled MCC, that includes major complications or comorbidities.

In another major change, the overall list of complications and comorbidities has been cut from 3,326 to 2,583 diagnoses.

Changing reimbursement

Congestive heart failure provides a good example of how the severity levels have changed under MS-DRGs, according to Sue Bowman, director of coding policy and compliance at the American Health Information Management Association (AHIMA). The diagnosis “congestive heart failure not otherwise specified,” or CHF NOS, has historically been the most common complication reported on Medicare inpatient claim forms. In 2004 through 2006, it appeared an average of 2.3 million times out of 11.8 annual admissions and often resulted in a higher DRG (diagnosis-related group) classification and increased payment to hospitals, according to the Medicare Fiscal Year 2008 IPPS Final Rule. However, under Medicare's new DRG classification scheme, CHF NOS is no longer considered a complication when hospital payments are determined.

“Previously the whole range of CHF diagnoses resulted in a higher DRG, but now only the acute systolic and diastolic [heart failure] codes will suffice as a major complication,” Ms. Bowman noted.

According to William Cors, MD, a consultant with the Greeley Company in Marblehead, Mass., the old DRG 127, heart failure and shock, now roughly translates to MS-DRG 292, heart failure and shock with CCs. Previously, DRG 127 encompassed heart failure with shock and all of its complications. Now, with MS-DRGs, some heart failure/shock cases with MCCs will be reimbursed at a higher rate, but cases with no CCs will be reimbursed at the lower rate (see Table).

Learning the ropes

Experts like Dr. Cors say that the increased attention on documenting disease severity will be directed at physicians, including hospitalists, who bear the primary responsibility for diagnosis coding. But AHIMA's Ms. Bowman said that although MS-DRGs are the most significant change in the 24-year history of per case reimbursement, hospitalists don't need to know all of the details behind them in order to make them work. Instead, they should aim for specificity when reporting diagnoses. A general rule, she said, is to avoid the “NOS” codes, especially when more specific codes could be used.

Robert S. Gold, MD, CEO of DCBA, Inc., a consulting company in Atlanta, has a simple rule of thumb to yield more specific diagnoses: Report the finding and the cause of the finding. For example, instead of reporting “anemia,” the condition should be reported as “anemia due to acute blood loss,” he said.

Dr. Gold acknowledges there are times where the cause of a finding may not be known, at least until test results are received. “But even in those situations, the general rule still stands,” he said. “Report the most specific diagnosis available.”