Health Care Financing Administration Awards Contract to 3M for Maintenance and Update of the Diagnosis Related Groups and Related Software Systems.

ST. PAUL, Minn., June 21 /PRNewswire/ -- The Health Care Financing Administration (HCFA) has awarded a contract to 3M Health Information Systems to maintain and update software systems and related documentation for processing Medicare claims for hospital inpatient and outpatient services. The contract was announced today by Richard Averill, research manager for 3M Health Information Systems.

Included in this contract are software for Diagnosis Related Groups (DRGs), Medicare Code Editor (MCE) and Outpatient Code Editor (OCE). According to Averill, the use of this standardized software by Medicare fiscal intermediaries will facilitate the systematic and uniform processing of Medicare claims.

In addition to developing software, 3M will perform data analysis, provide clinical input and recommend changes to the definition of the DRGs, MCE and OCE. The contract also includes maintaining and updating the ICD-10 Procedure Coding System (ICD-10-PCS). ICD-10-PCS was developed by 3M Health Information Systems under a contract with HCFA, Averill notes.

DRG Maintenance and Update

As background, Averill explains that under the Medicare prospective payment system, hospitals are paid a fixed amount based on the Diagnosis Related Group to which a patient is assigned. The 499 DRGs are assigned based on the patient's age, sex, principal diagnosis, secondary diagnoses, procedures performed and discharge status. DRGs are based on codes in the ICD-9-CM diagnostic and procedural coding system (International Classification of Diseases, Ninth Revision, Clinical Modification).

Under this contract, Averill explains, 3M will provide HCFA with recommendations for modifications to the DRG system including changes to the DRGs based on new ICD-9-CM codes. Using a sample of Medicare discharges, 3M will perform statistical analyses to propose and evaluate potential DRG modifications. In addition, 3M will evaluate all proposed DRG modifications from a clinical perspective. Based on DRG modifications approved by HCFA, 3M will produce updated DRG software and distribute a copy of the software and associated documentation to HCFA fiscal intermediaries, HCFA central office and HCFA regional offices for each fiscal year.

Medicare Code Editor Maintenance and Update

The Medicare Code Editor (MCE) is a software system for editing hospital inpatient claims to detect and report coding errors. Based on annual DRG modifications and ICD-9-CM coding system changes, 3M will provide HCFA with recommendations for modifications to the MCE. Based on MCE modifications approved by HCFA, 3M will also produce updated MCE software and distribute a copy of the software and associated documentation to HCFA fiscal intermediaries, HCFA central office and HCFA regional offices for each fiscal year.

Outpatient Code Editor Maintenance and Update

The Outpatient Code Editor (OCE) is a software system for editing hospital outpatient claims to detect and report coding errors. Averill explains that diagnostic information on outpatient claims is coded using ICD-9-CM. However, outpatient procedures are coded using the HCFA Common Procedure Coding System (HCPCS). The Balanced Budget Act of 1997 requires the implementation of a Medicare prospective payment system for outpatient services. HCFA has proposed that payments under the Medicare outpatient prospective payment system will be based on a single classification system, Ambulatory Payment Classifications (APCs). As a result, Averill says he anticipates that the existing OCE will be substantially modified, including the addition of bilateral surgery edits, unit edits and HCPCS correct coding edits.

Based on the Medicare outpatient prospective payment system and the annual changes to ICD-9-CM and HCPCS, 3M will provide HCFA with recommendations for modifications to the OCE. Based on OCE modifications approved by HCFA, 3M will produce updated OCE software and associated documentation and distribute a copy of the software to HCFA fiscal intermediaries, HCFA central office and HCFA regional offices three times during each fiscal year.

ICD-10-PCS Maintenance and Update

ICD-10-PCS was developed as a potential replacement for the ICD-9-CM procedure codes, which are used for reporting inpatient procedures. The ICD- 10-PCS was completed by 3M Health Information Systems in December of 1998 and is available on HCFA's web page on the Internet at http://www.hcfa.gov. Under this contract, Averill explains, 3M will provide technical assistance and make recommendations for modifications to ICD-10-PCS. Based on ICD-10-PCS modifications approved by HCFA, 3M will produce an updated version of ICD-10- PCS and associated documentation on an annual basis.

The contract was awarded May 3, 1999, and consists of a base year and four one-year option periods. "3M has been the DRG maintenance contractor for HCFA since the inception of the Medicare PPS," Averill says, "and we are pleased to have the opportunity to continue to assist HCFA. With the upcoming Medicare outpatient prospective payment system and the potential change to a new diagnosis and procedure coding system, there will be significant demands associated with this contract. However, we are confident that our extensive experience in patient classification systems, coding systems and prospective payment systems will allow us to meet all of HCFA's requirements."

3M Health Information Systems is an international leader in clinical information management, with products ranging from medical records coding systems to a comprehensive computer-based patient record system. Implementation, training and process improvement services are also provided. 3M products are based on open architecture and industry standards so they interface with legacy systems and offer fast implementation and a timely return on investment. 3M Health Information Systems is a business of 3M (NYSE: MMM), a diversified international company with a health care business consisting of over 10,000 medical, surgical, consumer, home health care, dental and pharmaceutical products. More information about 3M Health Information Systems is available on the Internet at http://www.3Mhis.com.