Boosting Hospital Margins with Accurate DRG Coding and Validation
Inpatient coding errors can lead to significant financial losses due to overpayments. Diagnosis-Related Group (DRG) validation ensures that medical records are accurately reflected in diagnostic and procedure codes, aligning them with the correct DRG on claims to secure proper reimbursement.
The purpose of a DRG validation review is to:
Confirm the principal and secondary diagnoses to ensure all diagnoses were billed appropriately, supported in the medical record, and billed according to official coding guidelines
Prove the clinical documentation and results of diagnostic testing support the billed diagnosis
Verify that all procedure codes were coded accurately according to official coding guidelines, and supported by the documentation in the patient’s medical record
Corroborate the discharge status code and all other data elements affecting the DRG assignment
Validate diagnoses identified as Hospital Acquired Conditions (HACs) were coded with the correct present on admission (POA) indicator
Claim Level Validation
Proprietary software is commonly used to determine the correct DRG by analyzing the procedure and diagnostic codes on the claim, then comparing it to the DRG originally assigned.
Medical Record Level Validation
Many organizations employ certified coders to re-code claims based on medical records, ensuring the diagnoses and procedures are accurately reflected. These correct codes are then compared to the ones originally on the claim, and any discrepancies are used to determine the appropriate DRG and adjust the resulting charge accordingly.
Clinical Level Validation
Some organizations have board-certified physicians, practitioners, or nursing personnel review medical records to make sure that lab results and clinical findings are accurately documented.
Business Intelligence
Today, DRG validation increasingly relies on analytics-driven chart selection. With easy access to data, providers and organizations can now use both prospective and retrospective analytics to gain greater insights and value. Technology-savvy organizations are leveraging 'Bots' algorithmic robotic software — to retrieve records faster, streamline processes, and automate tasks like program tracking, monitoring, and letter generation, replacing time-consuming manual efforts.
DRG Shift Review
A DRG shift occurs when the DRG assigned to a patient's claim does not accurately reflect the care provided, often resulting in underpayment or overpayment. It involves analyzing the patient's medical records and diagnosis/procedure codes to identify potential shifts in the assigned DRG. DRG shift review is a critical component of DRG coding validations.
Although hospital Clinical Documentation Improvement (CDI) staff often review potential shifts due to annual code changes, they may not consistently monitor these shifts on an ongoing basis.
Companies with DRG validation software use proprietary rules-based algorithms and machine learning to quickly identify potential DRG shifts. By catching these shifts, hospitals can recover missed reimbursement opportunities and ensure they receive the appropriate payment for the care they provided.
DRG shift refers to the change in the DRG assignment for a patient's claim when coded in ICD-10 compared to the DRG assigned when the case was coded in ICD-9. This shift can result in increased or decreased reimbursement for specific conditions or procedures. The implications of DRG shifts are significant for healthcare organizations, as they can impact the Case Mix Index (CMI) and overall reimbursement.
DRG Shift Examples
The following charts provide details concerning how DRG shifts are not only driven by incorrect coding, data transfer issues, or improper reporting, but also relate to regulator factors for pricing, costing, and reimbursement.
Financial Impact
DRG shifts can have a substantial financial impact on hospitals. If a large portion of the patients serviced by a hospital fall into a DRG that has shifted under ICD-10, their Case Mix Index (CMI) will change compared to what it looked like under ICD-9. Changes in CMI signal possible changes in overall reimbursement for the organization, making it crucial for financial administrators to closely monitor these numbers.
Revenue Loss/Gain
Hospitals are concerned about the potential revenue loss if DRGs shift in an unfavorable direction. The specific code changes in ICD-10 can impact DRG-based revenues. Paying close attention to these changes can make a significant difference in whether a DRG shift results in appropriate reimbursement or leads to financial shortfalls, affecting the hospital's overall revenue and financial health.
>>>Ensure your team is up to date on all the latest changes with an AAPC membership.
New Technology Add-On Payment (NTAP) Review
The NTAP program offers additional reimbursement for new medical technologies that meet certain criteria. To qualify, the technology must be new, provide significant clinical improvement, and not be adequately covered under the existing DRG system. This aspect is often overlooked by hospital CDI and coding staff during coding and auditing reviews.
Again, companies specializing in DRG validation use advanced software to identify NTAP opportunities. They then rely on trained coding and auditing staff to review medical records and charge details. The software detects eligible new technologies and flags services that may need to be refiled, ensuring the hospital receives the additional NTAP reimbursement.
Accurate DRG assignment and NTAP identification are crucial for healthcare organizations to secure fair and appropriate reimbursement. DRG shift and NTAP reviews provide the data hospitals need to meet revenue and compliance goals while maintaining financial stability. Combining these strategies enhances CMI, improves coding accuracy, and strengthens revenue integrity.
>>>Explore how AAPC's Experts can help improve your documentation.
Beyond Traditional CDI DRG Validation
A basic review of how DRGs are determined is probably in order.
The principal diagnosis (or procedure) establishes the DRG.
The secondary diagnosis or diagnoses determine the tier.
Most MS-DRGs are grouped in dyads or triads.
Specific secondary conditions are considered comorbid conditions or complications (CCs).
Of those secondary conditions are reviewed to determine if they meet criteria for major comorbid conditions or complications (MCCs).
If an encounter has one or more CCs, it is elevated to the middle tier.
If there are one or more MCCs (instead of or in addition to CCs), the encounter is referred to as “with MCC,” landing in the highest tier (that is, within the triad, or triplet, sets).
There are also binary dyads(couplets/pairs):
no CC/MCC
with CC/MCC
no MCC, with MCC
The relative weight, which is a number assigned to a DRG commensurate with the utilization of resources, usually increases with the severity and complexity of the patient’s condition(s).
Higher-weighted DRGs are designated longer lengths of stay, and reimbursement follows the relative weight.
More complex hospital patients with multiple comorbidities and complications often stay longer, require a higher intensity of service, utilize more resources, and increase the cost of care.
The traditional CDI workflow focuses on identifying CCs and MCCs in the patient’s medical record. Staff review the patient’s stay to find documentation that indicates the presence of additional conditions and procedures, which cannot be assigned by Health Information Management (HIM) coding staff unless they accurately represent the service, the complexity of the patient’s condition, and comply with guidelines.
Accurate data evaluation by government and commercial payers, as well as regulatory bodies, is crucial. HIM coding professionals and their colleagues in coding, billing, and documentation analysis often have valuable insights into why services are assigned as they are, ensuring there is no improper increase in reimbursement.
For example, in February 2021, the Office of the Inspector General (OIG) released a report titled Trend Toward More Expensive Inpatient Hospital Stays in Medicare Emerged Before COVID-19 and Warrants Further Scrutiny. The report’s key findings include:
1. Hospitals increasingly billed for inpatient stays at the highest severity level - the most expensive level - from FY 2014-FY 2019
2. Inpatient Hospital Stays are vulnerable to inappropriate billing practices, such as upcoding.
3. MS-DRGs and stays that are vulenrable to upcoding could use a review by CMS, as well as the hospitals that frequently bill for them.
Many in the industry have pointed out multiple flaws throughout the OIG’s report analysis. Here are some examples:
Referencing “complications” in a different way than HIM recognizes comorbidities and complications.
Coding personnel and other healthcare professionals understand that an illness or injury which is present on admission is a comorbidity, and that if a condition develops during a stay and makes the stay more complicated it may become a major complication, but this is not necessarily the provider’s fault.
The OIG found that as the number of cases with increased severity rose, the number of cases with lower severity decreased.
This flaw does not take into account the fact that CDI programs across the country for years have been laser focused with their providers to ensure better, compliant, and allowable documentation to help maintain their profit margin. If providers improve documenting CCs and MCCs in an allowable way, the data results would obviously increase.
The OIG did not provide some methodology explanations about how they arrived at length of stay (LOS) considerations. They excluded patients who had deceased.
LOS data can become skewed based upon changes in admission types as organizations might focus on ensuring patients are either outpatient/observation or inpatient more keenly than others; deceased patients can impact short stay LOS if they expire quickly, or long stay LOS if over the course of admission, they decompensate.
The OIG took issue with the fact that a patient with a principal diagnosis of pneumonia and 23 additional diagnoses, only one of which was an MCC, can be elevated to the tier of the highest severity.
But this is exactly how the system was designed. An individual MCC has the same impact as having 10 MCCs, and it moves the patient into the w/MCC tier. If the patient had acute hypoxic respiratory failure and required aggressive treatment and resource utilization, they had an MCC, whether it resolved rapidly or took days. They belong in the w/MCC tier.
As you can see from these brief insights into the OIG report, providers and regulatory agencies often have differing views on what constitutes correct coding and reimbursement. For a deeper analysis and an interesting perspective on this report, check out Dr. Erica Remer’s article on ICDMonitor, A Warning from the OIG About Higher Severity DRG Shift.
How AAPC Can Help
At AAPC, we provide industry-best business solutions to help healthcare organizations ensure accurate DRG assignments, optimize reimbursement, and maintain compliance with industry standards. Here are just some of our offerings:
Comprehensive Training Programs
Extensive training in DRG coding and validation equips your team with the latest knowledge and skills to maintain accuracy and compliance.
Professional coding support services, including DRG validations, help hospitals and healthcare organizations optimize their revenue cycles and prevent revenue loss.
Audit services include detailed DRG validation and shift reviews, leveraging both human expertise and cutting-edge technology to ensure accurate coding and appropriate reimbursement.
Consultation and Compliance Services
Tailored consulting services help your organization stay compliant with ever-evolving regulations, while maximizing revenue through accurate coding and documentation.
Conclusion
Accurate DRG validation is essential for securing proper reimbursement and maintaining financial stability in healthcare organizations. By ensuring that medical records, diagnostic codes, and procedure codes are correctly aligned with the appropriate DRGs, hospitals can avoid significant financial losses and optimize their revenue cycles.
Leveraging advanced tools, trained professionals, and thorough reviews at the claim, medical record, and clinical levels is crucial for identifying and correcting potential issues. As the healthcare landscape continues to evolve, staying ahead with accurate DRG coding and validation is more important than ever for achieving compliance and financial success — and AAPC Business Solutions can help.
Boost Your DRG Coding Knowledge
Looking for more insights on DRG coding, validation, and boosting your revenue cycle? Check out these additional articles from AAPC. They’re packed with practical tips and expert advice to help you enhance your organization’s financial health and stay compliant.
Clinical Validation: The Next Big Challenge in Inpatient Coding
DRG Pitfalls: What to look for in Documentation to Code Comorbid Conditions
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