In: Accounting
Background: MS-DRGs are used or reimbursement in the inpatient setting as part of the inpatient prospective payment system (IPPS). Only one MS-DRG can be assigned to an inpatient stay (this is different than the outpatient prospective payment system (OPPS) where more than one APC can be assigned to an outpatient encounter). MS-DRG assignment begins after the patient is discharged from the hospital, with the assignment of diagnoses and procedure codes. Diagnoses and procedures are assigned ICD-10-CM (diagnoses) and ICD-10-PCS (procedures) codes, and they are sequenced according to CMS official coding guidelines. Codes for comorbidities (coexisting conditions) and complications (conditions that develop during inpatient admission) are also assigned. Medical coders also indicate whether the diagnosis/condition was present on admission by assigning a POA indicator.
Each hospital discharge is first categorized into one of 25 major diagnostic categories (MDCs). Theprincipal diagnosis determines the MDC assignment (so proper assignment and sequencing of codes is critical). Within most MDCs, cases are divided into surgical MS-DRGs and medical MS-DRGs. Some surgical and medical MS-DRGs are further differentiated on the basis of the presence or absence of complications or comorbidities. The appropriate MS-DRG is assigned to each discharge by computer software, called an MS-DRG grouper, that assigns the appropriate MS-DRG based on information entered, including ICD-10-CM and ICD-10-PCS codes.
Each MS-DRG is assigned a predetermined relative payment weight that is based on the average resources used to treat Medicare patients in that DRG. A weight of 1.000 is average; meaning a relative payment weight higher than 1.000 means more resources are required to treat the patient and the payment is correspondingly higher. MS- DRG reimbursement is assigned using the DRG relative payment weight, a hospital base payment rate (a hospital specific per-encounter rate that is based on historic claims data), and any adjustments for disproportionate share hospital (DSH) status (facilities who treat a high percentage of low income patients), indirect medical education (IME) adjustment (facilities with approved graduate medical education program) and/or add-ons (for outliers and new medical service/technology).
Assignment: Administration wants to know the estimated MDS-DRG payment for several MS-DRGs. The grouper on your system has crashed. Administration needs this information immediately, so you need to calculate the MS-DRG payments manually. The add-on percentage for your facility is 1.03%. The hospital’s base rate is $6,321.67. The MS-DRGs that administration is concerned about are shown below in Table #1. The MS-DRG relative weights are shown in Table #2. Use Table #2 to obtain the MS-DRG relative weights, enter them into table #1, and calculate the estimated payments. The MS- DRG formula is Payment = MS-DRG Relative Weight x Hospital’s Base Rate x Add-on percentage. The first one is done for you.
Table #1
MS-DRGs with Relative Weight and Estimated Payment |
|||
MS-DRG |
MS-DRG Title |
Relative Weight |
Estimated Payment |
190 |
Chronic Obstructive Pulmonary Disease without MCC |
1.1924 |
$7,764.10 |
193 |
Simple Pneumonia & Pleurisy with MCC |
||
231 |
Coronary Bypass with PTCA with MCC |
||
281 |
Acute Myocardial Infarction Discharged Alive with CC |
||
304 |
Hypertension with MCC |
||
334 |
Rectal Resection without MCC/CC |
||
374 |
Digestive Malignancy with MCC |
||
389 |
GI Obstruction with CC |
||
472 |
Cervical Spinal Fusion with CC |
||
509 |
Arthroscopy |
Table #2
MS-DRG |
MS-DRG Title |
Relative Weight |
190 |
Chronic Obstructive Pulmonary Disease without MCC |
1.1924 |
193 |
Simple Pneumonia & Pleurisy with MCC |
1.4796 |
231 |
Coronary Bypass with PTCA with MCC |
7.8582 |
281 |
Acute Myocardial Infarction Discharged Alive with CC |
1.1912 |
304 |
Hypertension with MCC |
1.0263 |
334 |
Rectal Resection without MCC/CC |
1.6267 |
374 |
Digestive Malignancy with MCC |
2.0674 |
389 |
GI Obstruction with CC |
0.9344 |
472 |
Cervical Spinal Fusion with CC |
2.7722 |
509 |
Arthroscopy |
2.7722 |
MS-DRG 190 Estimated Payment Calculation:
Payment = MS-DRG Relative Weight x Hospital’s Base Rate x Add-on percentage
= 1.1924 x $6321.67 x 1.03 = $7,764.09808724 = $7,764.10
#3 – Case Mix Index Assignment
The MS-DRG system creates a hospital’s case-mix index (types or categories of patients treated by the hospital) cased on the relative weights of the MS-DRG. The case-mix index can be figured by multiplying the relative weight of each MS-DRG by the number of discharges within that MS-DRG. This provides the total weight for each MS-DRG. The sum of all total weights divided by the sum of total patient discharges equals the case-mix index.
Calculate the case-mix index for General Hospital:
General Hospital Case Mix Index |
||||
MS-DRG |
Description |
Number of Discharges |
Relative Weight |
Total Relative Weight |
280 |
Heart failure & shock |
50 |
1.8503 |
|
193 |
Simple pneumonia & pleurisy w CC |
42 |
1.4796 |
|
377 |
GI hemorrhage w MCC |
23 |
1.7541 |
|
190 |
COPD |
18 |
1.1924 |
|
483 |
Major joint & limb reattach upper extreme w CC/MCC |
17 |
2.4019 |
|
Total |
150 |
|||
Case Mix Index (CMI) = Total Relative Weight (for all 5 MS-DRGs)/Total Discharges CMI for top 5 MS-DRGs at General Hospital = |
Why is case mix index (CMI) important? The case-mix index (CMI) can be used to help administration make financial decisions and also to adjust the average cost per patient (or day) for a given hospital relative to the adjusted average cost for other hospitals by dividing the average cost per patient (or day) by the hospital’s calculated CMI. The adjusted average cost per patient would reflect the charges reported for the types of cases treated in that year. For example, if hospital A has an average cost per patient of $1,000 and a CMI of 0.80 for a given year, their adjusted cost per patient is $1,000/0.80 = $1,250. Likewise, if Hospital B has an average cost per patient of $1,500 and a CMI of 1.25, their adjusted cost per patient is $1,500/1.25 = $1,200.
Therefore, if a hospital has a CMI greater than 1.00, their adjusted cost per patient or day will be lowered and conversely if a hospital has a CMI less than 1.00, their adjusted cost will be higher. Ideally, a hospital likes their CMI to be as high as possible.
MS-DRGs with Relative Weight and Estimated Payment |
|||
MS-DRG |
MS-DRG Title |
Relative Weight |
Estimated Payment |
190 |
Chronic Obstructive Pulmonary Disease without MCC |
1.1924 |
$7,764.10 |
193 |
Simple Pneumonia & Pleurisy with MCC |
1.4796 | $9,634.15 |
231 |
Coronary Bypass with PTCA with MCC |
7.8582 | $51,167.26 |
281 |
Acute Myocardial Infarction Discharged Alive with CC |
1.1912 | $7,756.29 |
304 |
Hypertension with MCC |
1.0263 | $6,682.57 |
334 |
Rectal Resection without MCC/CC |
1.6267 | $10,591.96 |
374 |
Digestive Malignancy with MCC |
2.0674 | $13,461.50 |
389 |
GI Obstruction with CC |
0.9344 | $6,084.18 |
472 |
Cervical Spinal Fusion with CC |
2.7722 | $18,050.68 |
509 |
Arthroscopy |
2.7722 |
$18,050.68 |
General Hospital Case Mix Index |
||||
MS-DRG |
Description |
Number of Discharges |
Relative Weight |
Total Relative Weight |
280 |
Heart failure & shock |
50 |
1.8503 |
92.515 |
193 |
Simple pneumonia & pleurisy w CC |
42 |
1.4796 |
62.1432 |
377 |
GI hemorrhage w MCC |
23 |
1.7541 |
40.3443 |
190 |
COPD |
18 |
1.1924 |
21.4632 |
483 |
Major joint & limb reattach upper extreme w CC/MCC |
17 |
2.4019 |
40.8323 |
Total |
150 |
257.298 | ||
Case Mix Index (CMI) = Total Relative Weight (for all 5 MS-DRGs)/Total Discharges CMI for top 5 MS-DRGs at General Hospital =1.72 |
hospital has a CMI greater than 1.00, therefore their adjusted cost per patient or day will be lowered.