A Diagnosis-Related Group (DRG) is a statistical system of classifying any inpatient stay into groups for the purposes of payment. The DRG classification system divides possible diagnoses into 25 major body systems and subdivides them into one of 747 groups for the purpose of Medicare reimbursement. DRG grouper system has been used by Medicare since 1983 to reimburse hospitals for inpatient admissions. Factors used to determine the DRG payment amount include the diagnosis involved as well as the hospital resources necessary to treat the condition. Also used by a few states for all payors and by many private health plans (usually non-HMO) for contracting purpose. Hospitals are paid a fixed rate for inpatient services corresponding to the DRG group assigned to a given patient.
In 2007, CMS began monitoring claims for hospital-acquired conditions (HAC). Today, Medicare denies approximately $20 million per year under the HAC policy.
Additionally, four HACs comprise 12.2% of total medical professional liability costs:
– Hospital-acquired infections
– Hospital-acquired injuries
– Objects left in surgery
– Pressure ulcers
CMS focuses on these HACs due to the abundance of data that supports the assertion that these are preventable conditions. Reporting and capturing HACs allow hospital administrators and CMS to measure the facility’s performance, distinguish between pre-existing conditions and those acquired in the hospital, and to increase the validity of hospital report cards related to quality.