Making the most of DRGs. (Nuts and Bolts of Business).

While my previous columns focused on business issues related to physician medical practices, it is equally important to consider the hospital side of reimbursement.

In 1983 Congress mandated a national hospital prospective payment system or PPS for all Medicare patients. This was to be administered by the Health Care Financing Administration, (HCFA), now known as the Center for Medicare and Medicaid Services (CMS). From this mandate, the Diagnosis Related Group (DRG) system was born. It is from the DRG system that hospital reimbursement is derived.

Since a disease is an insurable event, each DRG represents the average resources needed to treat patients grouped to that DRG relative to a national average. To accomplish this, relative weights (RWs) are assigned to each DRG, an insurance factor that reflects the cost of caring for that particular disease, including any procedures. The DRG system then uses these relative weights to determine case rate mix, and ultimately hospital reimbursement.

It is important to remember that the DRG system is about the utilization of resources. It is not concerned with the severity of illness, patient prognosis, difficulty of treatment or need for intervention, unless those factors have an impact on changing the utilization of resources.

The PPS system begins with 25 broad major diagnostic categories, beginning with neurologic disorders and spanning all the major body systems. Each category contains appropriate DRGs for that category. Each DRG is assigned based upon ICD 9-CM diagnostic and/or procedural codes. Medical DRGs are coded and assigned first, beginning with an admitting diagnosis code and a principal diagnosis. Procedural codes are assigned next, including any surgery performed.

Based on the ICD 9-CM codes used, a single DRG is assigned for each inpatient case. DRG assignment is based on the principal diagnosis, the presence of any secondary diagnoses, the presence of co-morbidities or complications, patient age (usually younger or older than 17 years of age), the patient's status at time of discharge (alive or dead), as well as any surgical procedure performed.

Even though the principal diagnosis is the basis for DRG assignment, surgical procedures always take precedence over medical codes when assigning the final DRG, since in the eyes of CMS, surgical DRGs reflect higher complexity than medical DRGs.

The principal diagnosis determines the ultimate assignment of the DRG for each inpatient case. Certain criteria must be met to appropriately assign the principal diagnosis.

1. First, the principal diagnosis must be present, but not necessarily known at the time of admission. For example, if a patient is admitted with chest pain and non-specific ECG changes, and is found later to have elevated troponins, then the principle diagnosis would be acute non-q wave (sub-endocardial) myocardial infarction, at the time of discharge.

2. Second, the principal diagnosis must be responsible for the admission. If in the previous example, the patient chokes on breakfast, aspirates and develops pneumonia, the principal diagnosis is still acute non-q wave myocardial infarction since the MI was responsible for the admission.

3. Finally, the principal diagnosis must be significant enough to require inpatient treatment.

DRG relative weight

Hospital payment is based upon two factors, the DRG relative weight and the hospital base rate.

The DRG relative weight is an insurance cost factor, reflecting the degree of resources that will be consumed caring for a particular disease. Remember, this system does not take into account the individual patient. The DRG relative weight looks only at the cost of the disease, since each disease is an insurable event.

The second component to hospital reimbursement is the hospital base rate. This is determined by the hospital's case mix index (CMI). Taking the sum of all of the DRG relative weights and dividing by the total number of Medicare inpatient cases for that time frame determines the case mix index.

This is important since the lower a hospital's CMI, the lower its hospital base rate will be and ultimately will result in lower overall payments for the same DRGs than a hospital with a higher base rate. So maximizing DRG relative weight assignments is important in improving a hospital's overall payment.

Since the PPS pays a fixed amount for each inpatient case based on the DRG relative weight and the hospital base rare, there are several keys to improving hospital revenues.

* Decreasing the length of stay, which decreases the consumption of resources and allows additional patients to be admitted

* The overall decrease in resource utilization (drugs and supplies for example)

* An increase in the case mix index

The role of the physician is crucial in achieving these goals, since the physician ultimately controls the length of stay and physician documentation drives ICD-9 coding and DRG assignment.

Coding

Individuals responsible for coding of DRGs may code only those diagnoses documented by the physician. They are not allowed to code what you may have implied by your documentation.

Remember, many of these individuals do not have extensive medical backgrounds. Your documentation must be legible and your procedural, operative notes and discharge summaries must be done in a timely fashion so that the chart may be accurately coded.

It is important to understand that while you may not use possible or probable diagnoses for professional reimbursement, they are acceptable for DRG assignment. For example, if a patient is admitted with chest pain and you suspect that it is gastroesophageal reflux disease (GERD), you may list your diagnoses as possible GERD and the case will be coded as such.

Finally, it is important to document all complications and co-morbidities. This includes all abnormal lab tests and findings on diagnostic studies, as well as any treatment modalities resulting from the labs or studies.

What's in it for you?

You may be thinking that all of this is great for the hospital, but what's in it for me as a physician? As a result of the Balanced Budget Act of 1997, CMS is required to match physician RVUs to hospital relative weights. Any inconsistencies can result in up to a 15 percent withhold for Medicare payments.

Remember physician and hospital documentation and coding go hand in hand. Good documentation helps both parties. In addition, relative weights and their associated lengths of stay are the basis of severity adjusted profiling used by many insurers to compare physicians.

Finally, academic physicians are becoming increasingly dependent on hospital support due to declining professional reimbursement. The better the financial health of the hospital, the better your chances for receiving financial support through service contracts and the greater your chance of getting equipment that could potentially enhance your professional revenue.

The relationship between the hospital and its medical staff is a symbiotic one. They need each other. Physician understanding of the DRG system and appropriate documentation are the keys to success for both parties.

RELATED ARTICLE: Coding Counts

Consider some examples to understand the importance of good physician documentation.

A 35 year-old patient is assaulted with a baseball bat to the head and arrives unresponsive. He has no other significant injuries. You document his closed head injury and loss of consciousness (LOC).

If this is all that is documented in the DIG summary, this case will code to DRG 29: traumatic stupor and coma, age >1 7, coma < 1 hour, with no complications or co-morbidities.

This DRG is assigned a relative weight of 0.6956 with an average national payment of approximately $3,000. If however, you document that his loss of consciousness lasted for more than one hour, then the case will code to DRG 27: traumatic stupor and coma, age >17, coma >1 hour. Notice that with this change, the RW increases to 1.3514 and the average payment increases to over $5,800. This is a difference of close to $3,000, because patients with coma greater than an hour typically utilize more resources.

While you cannot document what did not occur (coma >1 hr) if the LOC was brief, the failure to do so when it is greater than one hour will result in a significant loss of revenue to the hospital.

The following example sheds light on the importance of documenting complications and co-morbidities.

An 85-year-old patient is admitted and treated with IV antibiotics for pneumonia. This will code to DRG 90: simple pneumonia, age >17, with no complications or co-morbidities. This is assigned a relative weight of 0.6344, with an average payment of $2,700.

Suppose the patient also has mitral regurgitation and you document it, as well. Valvular heart disease is considered a comorbidity. As such, the case now codes to DRG 89: simple pneumonia, age 17, with a co-morbidity or complication. The RW increases to 1.0601, and the average payment increases to over $4,500.

Common undocumented co-morbidities and complications (cc's) include alcohol or drug abuse, anemia due to blood loss, atelectasis, cachexia, cardiomyopathies, congestive heart failure, chronic obstructive pulmonary disease, cellulitis, dehydration, valvular heart disease, dehydration, hematuria, urinary tract infection, urinary retention, hyponatremia, renal failure, respiratory failure and post-op ileus or nausea and vomiting.

It is important to note that certain cc's are considered to be expected with the principle diagnosis, and therefore will not change the DRG. For example, nausea and vomiting would be considered to be part of the symptom complex for gastroenteritis. The coders and the coding software will identify this. Your role is to document them and to include any action that was taken to address them. For example, if you document that the patient had dehydration, you should state that it was treated with intravenous hydration.

The importance of co-morbidities and complications becomes even more pronounced when one looks at DRG's for surgical procedures.

A 65 year-old male undergoes a colon resection for carcinoma. The physician documents an uneventful postoperative course. This documentation would code to DRG 149: Major small and large bowel procedures without a comorbidity or complication. The relative weight is 1.5063 with an average payment of $6,500.

However, if the patient's pre-operative hematocrit was 35 percent, the intra-operative blood loss was 600 cc and the post-operative hematocrit dropped to 27 percent, this would be considered to be acute postoperative blood loss anemia.

If the physician documents the hematocrit drop as such and provides a treatment plan, such as "will treat with iron or will follow hematocrit (and repeats it), then you have provided adequate documentation for the case to be coded to DRG 148: major large and small bowel procedures with a cc. With the change in DRG to 148, the relative weight increases to 3.5332 and the average payment increases to $15,200.

David Tarantino, MD, MBA

David P. Tarantino, MD, MBA, is the executive medical director of Shock Trauma Associates, P.A., a 50+ physician, multispecialty practice associated with the University of Maryland School of Medicine. In addition, he is the chief executive officer of The MD Consulting Group, LLC, a health care management consulting firm in Baltimore, Md. Tarantino can be reached by phone at 410/328-3198 or by e-mail at [e-mail].