Medicare Severity Diagnosis-Related Group Research Articles

Impact of Hospital Variables on Case Mix Index as a Marker of Disease Severity

Case mix index (CMI) has become a standard indicator of hospital disease severity in the United States and internationally. However, CMI was designed to calculate hospital payments, not to track disease severity, and is highly dependent on documentation and coding accuracy. The authors evaluated whether CMI varied by characteristics affecting hospitals' disease severity (eg, trauma center or not). The authors also evaluated whether CMI was lower at public hospitals than private hospitals, given the diminished financial resources to support documentation enhancement at public hospitals. CMI data for a 14-year period from a large public database were analyzed longitudinally and cross-sectionally to define the impact of hospital variables on average CMI within and across hospital groups. Between 1996 and 2007, average CMI declined by 0.4% for public hospitals, while rising significantly for private for-profit (14%) and nonprofit (6%) hospitals. After the introduction of the Medicare Severity Diagnosis Related Group (MS-DRG) system in 2007, average CMI increased for all 3 hospital types but remained lowest in public vs. private for-profit or nonprofit hospitals (1.05 vs. 1.25 vs. 1.20; P<0.0001). By multivariate analysis, teaching hospitals, level 1 trauma centers, and larger hospitals had higher average CMI, consistent with a marker of disease severity, but only for private hospitals. Public hospitals had lower CMI across all subgroups. Although CMI had some characteristics of a disease severity marker, it was lower across all strata for public hospitals. Hence, caution is warranted when using CMI to adjust for disease severity across public vs. private hospitals.

Measuring Cardiac Waste

The authors developed 8 measures of waste associated with cardiac procedures to assist hospitals in comparing their performance with peer facilities. Measure selection was based on review of the research literature, clinical guidelines, and consultation with key stakeholders. Development and validation used the data from 261 hospitals in a split-sample design. Measures were risk adjusted using Premier's CareScience methodologies or mean peer value based on Medicare Severity Diagnosis-Related Group assignment. High variability was found in resource utilization across facilities. Validation of the measures using item-to-total correlations (range = 0.27-0.78), Cronbach α (.88), and Spearman rank correlation (0.92) showed high reliability and discriminatory power. Because of the level of variability observed among hospitals, this study suggests that there is opportunity for facilities to design successful waste reduction programs targeting cardiac-device procedures.

Value-Based Resource Management

With the health care environment shifting to a value-based payment system, Catholic Health Initiatives nursing leadership spearheaded an initiative with 14 hospitals to establish best nursing care at a lower cost. The implementation of technology-enabled business processes at point of care led to a new model for best value nursing care: Value-Based Resource Management. The new model integrates clinical patient data from the electronic medical record and embeds the new information in care team workflows for actionable real-time decision support and predictive forecasting. The participating hospitals reported increased patient satisfaction and cost savings in the reduction of overtime and improvement in length of stay management. New data generated by the initiative on nursing hours and cost by patient and by population (Medicare severity diagnosis-related groups), and patient health status outcomes across the acute care continuum expanded business intelligence for a value-based population health system.

Bundling post-acute care services into MS-DRG payments.

A bundled hospital payment system that encompasses both acute and post-acute care has been proposed as a means of creating financial incentives in the Medicare fee-for-service system to foster care coordination and to improve the current disorganized system of post care. The objective of this study was to evaluate the statistical stability of alternative designs of a hospital payment system that includes post-acute care services to determine the feasibility of using a combined hospital and post-acute care bundle as a unit of payment. The Medicare Severity-Diagnosis Related Groups (MS-DRGs) were subdivided into clinical subclasses that measured a patient's chronic illness burden to test whether a patient's chronic illness burden had a substantial impact on post-acute care expenditures. Using Medicare data the statistical performance of the MS-DRGs with and without the chronic illness subclasses was evaluated across a wide range of post-acute care windows and combinations of post-acute care service bundles using both submitted charges and Medicare payments. The statistical performance of the MS-DRGs as measured by R(2) was consistently better when the chronic illness subclasses are included indicating that MS-DRGs by themselves are an inadequate unit of payment for post-acute care payment bundles. In general, R(2) values increased as the post-acute care window length increased and decreased as more services were added to the post-acute care bundle. The study results suggest that it is feasible to develop a payment system that incorporates significant post-acute care services into the MS-DRG inpatient payment bundle. This expansion of the basic DRG payment approach can provide a strong financial incentive for providers to better coordinate care potentially leading to improved efficiency and outcome quality.

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Introduction: The need for prolonged mechanical ventilation (MV) may contribute significantly to hospital costs. ICD-9 MV codes classify patients by less than 96 hours (short-term) and greater than or equal to 96 hours (prolonged) of ventilator time and track to Medicare-severity diagnosis-related group (MS-DRG) designations and payments. The purpose of this study is to compare hospital costs with MS-DRG payment rates for short-term and prolonged ventilation cases. Hypothesis: Our hypothesis is that MS-DRG payments do not adequately compensate hospitals for short-term or prolonged ventilator care. Methods: We selected all adult Medicare inpatient discharges from the Premier Database for CY2010. Outliers were trimmed at 5th and 95th percentile of total costs. We identified short-term and prolonged acute ventilation using Medicare Severity Diagnosis Related Groups (MS-DRG). We compared the mean total hospitalization costs reported in the Premier Database with average MS-DRG payment rates (wage index = 1; geographic adjustment factor = 1) for 2010. We also compared the mean department level costs for the two ventilation groups. Results: Total hospital costs for the short-term ventilation group averaged $16,165 (N=9371, SD±8423) and for the prolonged acute ventilation group, $37,585 (N=4347, SD±16613). The mean length of stay for the short-term group was 6.6 (SD±4.3) days; for the prolonged ventilation group it was 14.5 (SD±7.0) days. More than half the total costs came from room and board costs and about one-eighth of the costs were pharmacy costs. Medicare payment for the short-term group was $13,560 and for the prolonged ventilation group was $31,405. Conclusions: The difference between average payments and average costs for ventilation cases means that hospitals risk an average loss of nearly 16.1% in the care of short-term mechanically ventilated patients and 16.4% in the care of long-term mechanically ventilated patients. Interventions targeting reduction in days of acute MV and optimization of hospital resources in the care of MV patients may have economic implications for the hospital as well as clinical benefits for the MV patient.

Leveraging drug-utilization and external benchmarking data to drive change in prescribing behaviors

Improved outcomes and cost savings achieved at a large hospital through a drug utilization benchmarking and reporting initiative are described. Using the University HealthSystem Consortium (UHC) Clinical Resource Manager (CRM) database, the University of Kansas Hospital identified nine target areas (based on Medicare Severity Diagnosis-Related Group) in which the hospital's drug-utilization practices were deemed suboptimal relative to those of other UHC member facilities with similar caseloads. The pharmacy department developed a CRM template for generating customized reports comparing the hospital's performance on various drug-utilization metrics with that of top-performing peers (i.e., institutions achieving the best patient care outcomes in terms of mortality and length of stay) in the nine target areas. A pre-post comparison of drug-utilization data collected before and after implementation of the reporting initiative indicated improved outcomes in all nine initially selected target areas, with estimated cumulative annualized cost savings of about $900,000. The CRM-generated reports are now distributed semiannually to attending physicians and other hospital leaders via electronic and hard-copy means, focusing on variances from UHC top-performer and overall UHC averages in the use of higher-cost drugs. The reporting initiative has generally fostered enhanced physician-pharmacist collaboration in the investigation of identified drug-utilization variances and implementation of practice changes. By evaluating service-specific trends of internal drug utilization against external benchmarks and emulating prescribing practices at top-performing institutions, an academic medical center has achieved improved patient care outcomes and cost savings.

Financial Impact of Improved Pressure Ulcer Staging in the Acute Hospital with Use of a New Tool, the NE1 Wound Assessment Tool

The NE1 Wound Assessment Tool (NE1 WAT; Medline Industries, Inc, Mundelein, Illinois), previously called the N.E. One Can Stage, was shown to significantly improve accuracy of pressure ulcer (PrU) staging. Improved PrU staging has many potential benefits, including improved care for the patient and better reimbursement. Medicare has incentivized good care and accurate identification of PrUs in the acute care hospital through an additional payment, the Medicare Severity-Diagnosis Related Group (MS-DRG). This article examines the financial impact of NE1 WAT use on the acute care hospital relative to MS-DRG reimbursement. PrU staging accuracy with and without use of the NE1 WAT from previous data was compared with acute care hospital PrU rates obtained from the 2006 National Inpatient Sample. Hill-Rom International Pressure Ulcer Prevalence Survey data were used to estimate the number of MS-DRG-eligible PrUs. There are between 390,000 and 130,000 MS-DRG-eligible PrUs annually. Given current PrU staging accuracy, approximately $209 million in MS-DRG money is being collected. With the improved staging afforded by the NE1 WAT, this figure is approximately $763.9 million. Subtracting the 2 reveals $554.9 million in additional reimbursement that could be generated by using the NE1 WAT. There is a tremendous financial incentive to improve PrU staging. The NE1 WAT has been shown to improve PrU staging accuracy significantly. This improvement has the potential to improve the financial health of acute care hospitals caring for patients with PrUs.

Neurointerventional Procedural Volume per Hospital in United States

Availability of neurointerventional procedures is recommended as a necessary component of a comprehensive stroke center by various regulatory guidelines that also emphasize adequate procedural volumes. We studied the volumes of neurointerventional procedures performed in various hospitals across the United States with subsequent comparisons with rates of minimum procedural volumes recommended by various professional bodies or used in clinical trials to ensure adequate operator experience. We reviewed the Nationwide Inpatient Sample database in the United States for the years 2005 to 2008. Using International Classification of Disease-Clinical Modification, 9th revision, and Medicare severity diagnosis-related group codes, we identified among hospitals that admit stroke patients those that met the minimum criteria for overall and individual procedural volumes specified in various guidelines. We then compared the characteristics between the high-volume hospitals that performed at least 100 cervicocerebral angiograms and met ≥1 other procedural criterion (n=79) and low-volume hospitals (n=958). Proportions of hospitals that met individual procedural volume criteria over the 4-year period according to procedure were: cervicocerebral angiography (7.0%-7.8%); endovascular acute ischemic stroke treatments (0.4%-2.6%); carotid angioplasty/stent placement (3.0%-5.3%); intracranial angioplasty/stent placement (0.3%-1.3%); and aneurysm embolization (1.3%-2.6%). There were significant trends for increasing numbers of all the endovascular procedures except intracranial angioplasty/stent placement over the course of 4 years. The high-volume hospitals were more likely to be urban teaching hospitals (70.9% versus 13.1%; P<0.001), had larger bed size (79.7% versus 26.9%; P<0.001), and had significantly higher rates of hemorrhagic stroke admissions and lower rates of transient ischemic attack admissions. Urban teaching location/status (OR, 8.92; CI, 4.3-18.2; P<0.001) and large bed size (OR, 4.40; CI, 2.0-9.5; P<0.001) remained as independent predictors of a high-volume hospital when adjusted for age, gender, risk factors, and stroke subtype. There are very few hospitals in the United States that meet all the neurointerventional procedural volume criteria for all endovascular procedures recommended to ensure adequate operator experience. Our results support the creation of specialized regional centers for ensuring adequate procedural volume within treating hospitals.

International Medical Travelers, Length of Stay, and the Continuum of Care

In this study, we assess whether length of stay (LOS) is associated with patient geographic origin and whether payment source for international patients explains differences in LOS. We used a retrospective case-control study to compare inbound international patients coming to the United States and domestic patients, who were admitted to academic medical centers (AMCs) between October 2005 and September 2008. International patients were matched to domestic patients on the basis of age, gender, AMC, admission status, severity of illness (SOI), and Medicare Severity Diagnosis-Related Group. International patients stayed significantly longer than domestic patients, with an average LOS of 6.9 days (SD = 14.0) compared with 6.0 days (SD = 5.3) for domestic patients (P < .001). There was no difference in LOS between patients with international commercial and international self-pay payment sources (P = .108). Results of the multivariate analysis showed that international patients with extreme SOI stayed 21% longer than otherwise similar domestic patients with extreme SOI (P = .012). The most complex international patients coming to US AMCs have substantially longer LOS than the most complex domestic patients, even after controlling for demographic characteristics, and type of condition. More research is needed to understand the underlying drivers of these differences.

Change in MS-DRG Assignment and Hospital Reimbursement as a Result of Centers for Medicare &amp; Medicaid Changes in Payment for Hospital-Acquired Conditions

In October 2008, the Centers for Medicare & Medicaid Services reduced payments to hospitals for a group of hospital-acquired conditions (HACs) not documented as present on admission (POA). It is unknown what proportion of Medicare severity diagnosis related group (MS-DRG) assignments will change when the International Classification of Disease, 9th Revision, Clinical Modification (ICD-9-CM) diagnosis code for the HAC is not taken into account even before considering the POA status. The primary objectives were to estimate the proportion of cases that change MS-DRG assignment when HACs are removed from the calculation, the subsequent changes in reimbursement to hospitals, and the attenuation in changes in MS-DRG assignment after factoring in those that may be POA. Last, we explored the effect of the numbers of ICD-9-CM diagnosis codes on MS-DRG assignment. We obtained 2 years of discharge data from academic medical centers that were members of the University Health System Consortium and identified all cases with 1 of 7 HACs coded through ICD-9-CM diagnosis codes. We calculated the MS-DRG for each case with and without the HAC and, hence, the proportion where MS-DRG assignment changed. Next, we used a bootstrap method to calculate the range in the proportion of cases changing assignment to account for POA status. Changes in reimbursement were estimated by using the 2008 MS-DRG weights payment formula. Of 184,932 cases with at least 1 HAC, 27.6% (n = 52,272) would experience a change in MS-DRG assignment without the HAC factored into the assignment. After taking into account those conditions that were potentially POA, 7.5% (n = 14,176) of the original cases would change MS-DRG assignment, with an average loss in reimbursement per case ranging from $1548 with a catheter-associated urinary tract infection to $7310 for a surgical site infection. These reductions would translate into a total reimbursement loss of $50 261,692 (range: $38 330,747-$62 344,360) for the 86 academic medical centers. Those cases, for all conditions, with reductions in payment also have fewer additional ICD-9-CM codes associated. Removing HACs from MS-DRG assignment may result in significant cost savings for the Centers for Medicare & Medicaid Services through reduced payment to hospitals. As more conditions are added, the negative impact on hospital reimbursement may become greater. However, it is possible that variation in coding practice may affect cost savings and not reflect true differences in quality of care.

Devices and drugs for stroke: why do regulations differ?

Devices and drugs for stroke: why do regulations differ?

Quality and payment: the U.S. experience of typing inpatient and outpatient casemix payments to quality measures and reporting

Over the past four to five years, the focus in casemix-based payment systems in the United States has shifted more and more towards value-based-purchasing and pay-for-performance measures. The reporting of pre-set quality indicators is now fundamentally in place for both the inpatient prospective-payment system, based on Medicare-Severity Diagnosis Related Groups (MS-DRGs), and, more recently, the outpatient prospective-payment system, based on Ambulatory Payment Classifications (APCs). For hospitals to receive their full casemix MS-DRG or APC payment, whether for inpatient services or outpatient services, all required quality indicators must be reported. Reporting pre-determined quality indicators is important for data collection and monitoring, but the simple act of reporting data does not, and should not, be used as a proxy to talk about the delivery of healthcare services. In fact, critics in the U.S. consider the current pay-for-performance system simply a pay-for-reporting system which does little to measure true quality, or the lack of it. Additional quality-of-care concepts have been introduced more recently. These focus on the reporting of specific diagnoses that may influence final DRG assignment and, thus, final payment in the inpatient setting. These concepts focus on whether reported diagnoses were Present on Admission (POA), or whether they were Hospital Acquired Conditions (HACs) that surfaced during the patient's hospitalization. Examining such data begins to tell a different story about the patient's disease state upon arrival to the hospital versus conditions, often considered preventable, that might have occurred during the stay. The practice of flagging diagnoses that are POA, versus those that are HACs, is one method the U.S. Medicare program uses to provide an incentive to hospitals to offer high-quality treatment while a patient is in their care. If certain preventable conditions, including Never Events, occur during the patient's stay, then Medicare believes that these secondary diagnoses should not influence grouping, nor the final MS-DRG payment calculation. This link between the reporting of specific data, the assumption made about the quality-of-care rendered, and the final impact on payment is quite new, and to some extent controversial. It will be reviewed during this session.

Coding and documentation: Medicare severity diagnosis‐related groups and present‐on‐admission documentation

Effective October 1, 2007, the Centers for Medicare and Medicaid Services has changed its methodology for determining the diagnosis-related group for hospitalized patients. In an effort to more accurately reflect severity of illness, the 538 diagnosis-related groups have been converted to 745 new Medicare severity diagnosis-related groups. In addition, selected hospital-acquired complications not identified as present on admission will no longer be reimbursed. The changes will have profound effects on reimbursement for hospitalizations. To minimize financial losses under the new rules, hospitals and physicians will have to devote significant resources and attention to improved documentation. This article will discuss the new payment system, the physician's role in ensuring that all clinically important diagnoses are captured by coding specialists, and strategies that can be employed to respond proactively to the challenge.

The Use of Ambulatory Patient Groups for Regulation of Hospital Ambulatory Surgery Revenue in Maryland

The Maryland Health Services Cost Review Commission (HSCRC or the commission) is a government agency with the authority to establish rates for both inpatient and outpatient services for all general acute care hospitals in the state. By law and consistent with the state's unique Medicare waiver, all payers (including Medicare and Medicaid) must pay hospitals on the basis of these rates. The HSCRC has used diagnosis related groups to set case-mix-adjusted limits on the revenue per discharge for inpatient services (similar to Medicare inpatient prospective payment nationally) yet, the Maryland rate-setting system for outpatient services has not embodied incentives to control utilization of services. Beginning in the state's fiscal year 2008, the HSCRC is implementing regulation of ambulatory surgery services using ambulatory patient groups to provide better incentives to control utilization, and to facilitate comparisons of the case-mix-adjusted charges per ambulatory surgery case across hospitals. Maryland has been an innovator in the design and successful implementation of payment systems and other incentive mechanisms to constrain hospital cost, maintain payment equity, and ensure access to needed hospital care. The HSCRC's adoption of all patient refined diagnosis related groups and the hospital-specific relative value method for establishing diagnosis related group weights in 2005 was relevant to the Centers for Medicare and Medicaid Services' decision to move to Medicare severity diagnosis related groups beginning in federal fiscal year 2008, and to consider the use of hospital-specific relative value weights. The HSCRC's decision to use ambulatory patient groups for ambulatory surgery is an attempt to apply the most effective features of inpatient payment systems, prospective payment, including incentives to control service volumes. As such, it represents a radical departure from prevailing payment arrangements in that it seeks to remove the traditional distinction between inpatient and outpatient surgical services, a distinction that has blocked the development of effective and well-integrated outpatient payment systems for decades. This article describes the policy rationale for this system, the analysis that was performed, and the methods that will be used to control the revenue per case and compare the relative charges of the hospitals.

CMS aims to pay accurately for Medicare inpatient care

Medicare’s inpatient prospective payment system for the fiscal year that starts October 1 includes changes that the Centers for Medicare and Medicaid Services (CMS) hopes will make it an astute purchaser of health care. CMS adopted a new classification system that, the agency said, better recognizes the severity of a patient’s illness and subsequent resource use than the original system, which has been part of Medicare’s payment systems for more than 20 years. The overall effect is that for a specific illness or condition, the payment for treating a patient who is severely sick will be more than the payment for treating a less-ill patient. Known as the Medicare Severity DRG (MS-DRG) system, this new classification scheme has 25 major disease categories, 745 diagnosis-related groups (DRGs), and three subclasses of complications and comorbidities. The system has the same number of major disease categories as the original system, 207 more DRGs, and the new subclass “major complication or comorbidity.”