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What is DRG (Diagnosis Related Group)?

Created: October 2, 2015 Last Modified: October 29, 2015

Diagnosis-Related Groups (DRGs) are used to categorize inpatient hospital visits severity of illness, risk of mortality, prognosis, treatment difficulty, need for intervention, and resource intensity. The DRG system was developed at Yale University in the 1970’s for statistical classification of hospital cases

Medicare Severity Diagnosis Related Group (MS-DRG)

MS-DRGs are Medicare’s adaptation of the DRG system. There over 450 MS-DRGs with groups added or modified periodically. DRGs were originally designed for statistically tracking purposes. Today, MS-DRGs are used for billing under Medicare’s Inpatient Prospective Payment System (IPPS).

Sidebar: Ambulatory Payment Classification (APC) system is used for billing outpatient hospital visits through the Outpatient Prospective Payment System (OPPS) and the Physician Fee Schedule is used for billing non-hospital medical visits.

MS-DRGs add a level of detail that is not found in the original DRG system. MS-DRGs have 3 levels of severity:

  • Major complications or comorbidities (MCC);
  • Complications or comorbidities (CC); or
  • Neutral (Non-CC)

A single MS-DRG is assigned to each inpatient stay. Hospitals are then reimbursed by Medicare based on the assigned MS-DRG, severity, and hospital location (i.e. a procedure in New York City costs more than the same procedure in rural Kansas). Hospitals are reimbursed a flat fee based on the assigned MS-DRG regardless of how much the patient’s stay actually costs. This is designed to encourage cost savings by hospitals. MS-DRGs are assigned based on the ICD diagnosis and procedure codes – that is one reason why medical coding is so important.

Major Diagnosis Category (MDC)

Each DRG falls within a Major Diagnosis Category (MDC). Most DRGs fall within the 25 Major Diagnosis Categories. MDC group illnesses by specialty, organ system, or medical etiology. MDC 1 is for diseases and disorders of the nervous system; MDC 2 is for diseases and disorders of the eye; and so on.

MDC 0 is known as Pre-MDC. This category is used for patient groups that require an extreme level of resources such as bone marrow or organ transplants.

All Patient Diagnosis Related Group (AP-DRG)

The All Patient Diagnosis Related Group (AP-DRG) system is designed to better handle all patients – not just Medicare patients. The Medicare is only for older Americans so the MS-DRG does not have codes for illnesses affecting newborns and children and 18 years old. AP-DRG is used for billing non-Medicare patients in the same way that MS-DRG is used for billing Medicare patients. AP-DRG is used to some private insurers.

All Patient Refined Diagnosis Related Group (APR-DRG)

APR-DRG is maintained by M3 Health Information Systems. APR-DRG is built upon the AP-DRG system and offers an additional level of granularity. The APR-DRG system has 4 categorizations used to identify the level of severity of the illness and risk of mortality. These 4 additional severity categories are:

  • Minor severity;
  • Moderate severity;
  • Major severity; and
  • Extreme severity.

These severity categorizations help hospitals to bill more accurately for the level of resources and care provided. ARP-DRG is used by some private insurers.

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Source: http://icd.codes/articles/what-is-drg