CMS Evaluating Ingenix's APS-DRGs System to Facilitate Medicare Inpatient Payment Reforms; Ingenix's APS-DRG System May Be Easier for Hospitals to Implement, Maintain and Improve over Time, an Independent Evaluation Concludes.

EDEN PRAIRIE, Minn. -- Ingenix, a leading health information company, today announced that the Centers for Medicare & Medicaid Services (CMS) is evaluating Ingenix's APS-DRGs(R) system to facilitate Medicare inpatient reimbursement reforms that base payments on hospital costs and the severity of a patient's condition. In addition, Ingenix today announced the findings of an independent evaluation of its APS-DRGs (All Payer Severity-Adjusted Diagnosis Related Groups) system, which concluded that the solution provides a simpler and perhaps more accurate approach to predicting hospital costs than alternative systems being considered by CMS.

In August, CMS announced the details of its inpatient reimbursement reforms and that it would conduct an evaluation of severity-adjustment systems.

"APS-DRGs have two important advantages," said Robert J. Leary, vice president of Ingenix. "First, the APS-DRG system is highly accurate. Second, the APS-DRGs methodology is transparent, meaning that hospitals and the public can review the logic within the system to fully understand the variables used to predict costs and measure patient severity."

Ingenix's APS-DRG system is a severity-adjustment solution that analyzes clinical data to classify patients into meaningful patient clusters based upon the diagnosis and condition of the patient. It includes a unique case-specific relative weight methodology that uses Coexisting Clinical Conditions to discriminate among sicker patients based upon additional complications or comorbidities. Higher weights are assigned to more serious conditions and earn higher reimbursement, while lower weights are assigned to patients with a lower level of severity and earn a lower level of reimbursement. Together, these components enable hospitals to predict care delivery costs based on how sick the patient is, and provide the foundation for payers and providers to implement severity-adjusted reimbursement.

An independent evaluation conducted by the Lewin Group compared APS-DRGs with Consolidated Severity Adjusted DRGs (CSA-DRGs), which is the severity-adjustment system that CMS initially proposed to deploy. According to the Lewin evaluation, "APS-DRGs are fundamentally simpler and more flexible than CSA-DRGs. Because of this simplicity and flexibility, APS-DRGs may be more transparent, easier for hospitals to implement, and easier to maintain and improve over time than CSA-DRGs."

"The Lewin Group has concluded that the modified APS-DRGs are worthy of consideration by CMS and the public policy community as an alternative to the proposed CSA-DRGs," said Al Dobson, senior vice president of The Lewin Group. "Furthermore, the Lewin Group found that APS-DRGs explain at least as much variance in patient case costs as CSA-DRGs and are less likely to underpay high-casemix hospitals than CSA-DRGs."

The changes to CMS' Inpatient Prospective Payment System (IPPS), which include revisions to the relative weights associated with each Diagnosis Related Group (DRG), will be phased in over three years, starting October 1, 2006. The first part begins a transition to using estimated hospital costs, rather than list charges, to set payments. Beginning in October, CMS is also introducing 20 new categories to the DRG system to adjust more effectively for differences in severity across patients. CMS anticipates implementing a more comprehensive severity-adjustment methodology in fiscal year 2008 and completing the transition to revised relative weights in fiscal year 2009.

About Ingenix

Ingenix, a wholly-owned subsidiary of UnitedHealth Group (NYSE:UNH), provides products and services to a diverse customer base within the health care community. Organizations rely on its innovative technology to improve the delivery and operations of their business. More information about Ingenix and its products and services can be obtained at http://www.ingenix.com.

APS-DRGs is a registered trademark of Ingenix.