¶ … Coding Accuracy MS-DRG Coding Accuracy

The Deficit Reduction Act of 2005 mandated changes in how the Centers for Medicare & Medicaid Services (CMS) reimburse IPPS hospitals for patient care (Centers for Medicare & Medicaid Services [CMS], 2011, p. 104). If a condition is present on admission (POA) then the hospital will receive appropriate payment for services rendered, but if the patient develops a preventable hospital acquired condition (HAC) that wasn't POA, then CMS may reduce payment to the hospital. There are currently 10 HAC in use that involve conditions like bed sores, falling and other physical injuries, and surgical site infections, and the new one proposed for 2012 is contrast-induced kidney injury (CMS, 2011, p. 119-121).

CMS payments may also be adjusted depending on illness severity for admitted patients using a system called Medicare severity diagnosis related groups (MS-DRGs) (CMS, 2011, p. 58-59). For example, hospitals treating patients suffering from less severe disease will be reimbursed at a lower rate compared to patients suffering from more severe disease. The three subclasses of severity, from most to least severe, are: major...

Of the 4,776,803 discharges that occurred between 2005 and 2007, 4% had at least one HAC. The dominant conditions were injuries from falls (67%) and bed sores (30%).
If the HAC was removed from consideration then it was expected that 26.7% of all such cases would experience a change in MS-DRGs assignment, with an expected loss of approximately 1 million dollars per hospital per year (McNutt, 2010). However, if POA status was accounted for then only 7.5% of HAC cases would experience a change in MS-DRG status. Adjusting for POA status therefore reduced HAC-associated reimbursement loss to approximately 300,000 dollars per hospital per year, a savings of nearly 700,000 dollars per hospital.

The mandated use of illness severity…