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.
Beginning in 2007, CMS overhauled the DRG system with the development of “severity-adjusted DRGs.” Specifically, beginning in October 2007, CMS began to replace DRGs with “Medicare-severity DRGs” or “MS-DRGs” through a three-year phase-in period that blended payment under the old DRG system and the MS-DRG system. While there are similarities between the two systems in the existence or absence of complications or co-morbidities, the MS-DRG system adds a third category – “Major complications and/or co-morbidities.” Cases are classified into MS-DRGs for payment based on the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay. In a small number of MS-DRGs, classification is also based on the age, sex, and discharge status of the patient. The diagnosis and discharge information is reported by the hospital using codes from the IC-9-CM (the International Classification of Diseases, 9th Edition, Clinical Modification).
The Major Diagnostic Categories (MDC) are formed by dividing all possible principal diagnoses (from ICD-9-CM) into 25 mutually exclusive diagnosis areas. MDC codes, like diagnosis-related group (DRG) codes, are primarily claims and administrative data element unique to the United States medical care reimbursement system. DRG codes also are mapped, or grouped, into MDC codes. The diagnoses in each MDC correspond to a single organ system or etiology and, in general, are associated with a particular medical specialty. MDC 1 to MDC 23 is grouped according to principal diagnoses. Patients are assigned to MDC 24 (Multiple Significant Trauma) with at least two significant trauma diagnosis codes (either as principal or secondary) from different body site categories. Patients assigned to MDC 25 (HIV Infections) must have a principal diagnosis of an HIV Infection or a principal diagnosis of a significant HIV related condition and a secondary diagnosis of an HIV Infection.
MDC 0, unlike the others, can be reached from a number of diagnosis/procedure situations, all related to transplants. This is due to the expense involved in the transplants so designated and because these transplants can be needed for a number of reasons which do not all come from one diagnosis domain. DRGs which reach MDC 0 is assigned to the MDC for the principal diagnosis instead of to the MDC associated with the designated DRG.
Since patients can have multiple procedures related to their principal diagnosis during a particular hospital stay, and a patient can be assigned to only one surgical class, the surgical classes in each MDC are defined in a hierarchical order. Patients with multiple procedures are assigned to the highest surgical class in the hierarchy to which one of the procedures is assigned. Thus, if a patient receives both a D&C and a hysterectomy, the patient is assigned to the hysterectomy surgical class because a hysterectomy is higher in the hierarchy than a D&C. Because of the surgical hierarchy, ordering of the surgical procedures on the patient abstract or claim has no influence on the assignment of the surgical class and the MS-DRG.
The surgical hierarchy for each MDC reflects the relative resource requirements of various surgical procedures. In some cases a surgical class in the hierarchy is actually an MS-DRG. For example, Arthroscopy is both a surgical class in the hierarchy and
MS-DRG 509 in MDC 8, Diseases and Disorders of the Musculoskeletal System and Connective Tissue. In other cases the surgical class in the hierarchy is further partitioned based on other variables such as complications and comorbidities, or principal diagnosis to form multiple MS-DRGs. As an example, in MDC 5, Diseases and Disorders of the Circulatory System, the surgical class for permanent pacemaker implantation is divided into three MS-DRGs (242-244) based on whether or not the patient had no CCs, a CC or an MCC.