Medicare Severity Diagnosis Related Groups

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Introduction

Medicare-severity diagnosis-related group is a Medicare refinement to the diagnosis-related group (DRG) classification system. MS-DRG allows payment to be more closely aligned with resource intensity. In other words, this system classifies patients in different health facilities according to their ailments and an average cost of each ailment is determined. Examples of categories used in most cases include the age of the patients, the respective diagnosis, surgical processes and other such information. According to Ferec (2011) “MS-DRG is linked to a fixed payment amount based on the average cost of patients in the group” (p.32).

The DRG information is normally provided with the bill as a rule in Medicare. This information, on the other hand, is helpful to Medicare since they use it to determine the group of cases being handled by a specific health facility; hence can know the types and amounts of resources to avail in the health facilities. This is an important subject since it creates awareness of the billing systems used in medical facilities.

The main ideas to be covered in this discussion include first, the issue of reimbursement referring to the classification used when provided funds and other resources to the health care facilities. The second issue is the relevance of this discussion to the coding staff that is how they will use this information to improve their skills and practices. The third is the explanation of the term MS-DRG, followed by an insight on why and how they are used as the fourth point. The fifth point will highlight the personnel who use this system while the sixth one will be on its history, which is the origin and evolution. Finally, this discussion will consider the advantages and disadvantages of MS-DRG’s. This is an important and must-read document for health practitioners and any other person with an interest in the health sector.

Reimbursement

Rules concerning reimbursement under the system of MS-DRG’s indicate that expenses incurred when treating patients from complications acquired from within the facility will not be reimbursed. This, therefore, implies that health facilities should be extra careful and maintain prominent levels of hygiene to ensure that patients do not get infections while undergoing treatment. This means that any such expenses will be considered as a loss to the hospital. For any kind of reimbursement to take effect, proper documentation is required. This ensures that all the relevant expenses are covered and justified in the documents.

These documents should also be audited so that they present a true and fair view of the expenses. Medicare provides the audit services to ensure that no alterations are made to the documents. They, therefore, rely on these documents when compensating the health facilities and also when providing the other necessary health resources.

One of the factors to be considered when reimbursing the health facilities in the health cases mostly dealt with. This is one of the importance of coding since it ensures that resources are disbursed as per their usage. Facilities handling cases of surgery for example should be allocated more resources because of the expertise facilities required. There are other facilities on the other hand which mostly deal with casual patients, mostly outpatients and such require fewer resources. The hospital management is responsible for providing this information to Medicare staff. They are therefore required to be conducting frequent analyses of the cases being reported in the hospital alongside the frequency of the same and the number of resources required to handle these cases.

With the introduction of MS-DRG’s, the reimbursement made to health facilities increased to their advantage. The health care facilities that benefitted from this the most are those which provided detailed data on their expenses and resource requirements. According to Healthcare investment analysis, this system determines the concept of severity “as being directly related to the number and complexity of codes placed on the bill”. In a real sense, however, the monetary value of the reimbursements has not increased, but only the scope of reimbursement. This means that some hospitals are more advantaged than others. The less advantaged hospitals in this system are those which “do not evaluate coding, compliance and reimbursement practices” (p.12). These stand at a very high risk of trailing massive amounts of revenue.

Relevance to coding staff

Accurate coding is one of the key success indicators in health care facilities. This is, however, a challenge especially as a result of the frequently changing technology and the need to stay up to date. To access and maintain recent technology Kennedy (2008) suggests that “hospitals need detailed information on regulatory updates, new codes and code combinations, clinical documentation to help bridge past and present coding practices and reimbursement information to minimize guesswork” (p.12).

For the success of this system, the coding team needs to be well versed with the latest coding software such as web.stat. this is ” a scalable, web-based encoding solution that offers both book and logic-based coding as well as automated regulatory updates” (Kennedy 2008). It reduces the entire process of having to do manual coding which is both time-consuming and tiresome alongside being less accurate.

In Medicare, coding is the greatest challenge when implementing the MS-DRGs. The implantation of this system spells out more work for the coding staff owing to the increase of the coding feature to approximately 750, hence requiring more time. Schmidt and Melinda state that “the increased workload on the coding area of the department put a burden on the other parts of the department since the director devotes most of her time to coding, coding-related, and revenue cycle issues” (2009, p.67). From this, we can deduce that the increased workload has affected the coding staff more, but this also boils over to the other departments in the organization. Therefore, even as the coding staffs are the most affected by this new system, every other person in the organization feels the impact since they are expected to contribute to the entire process.

This however also has advantages to the coding staff which includes the fact they have a broader classification system. This means that they do not have to crack their heads when assigning patients’ symptoms to different categories. Before this was a problem since it meant some elements would have to be combined into one. Some medical scholars even argue that the previous system that was being used was more time consuming hence preferring what has been introduced.

What is MS-DRGs

MS-DRG’s is a system used to classify health care facilities into different categories depending on the services and products being provided. This system is aimed at determining the amount of reimbursement that should be allocated to a hospital. The classification is normally based on factors such as the age of patients frequenting the facility, the different diagnoses, sex, procedures being carried out, the presence of complications and the discharge status. Patients with the same kind of diagnoses and using similar equipment to be treated should be charged approximately similar amounts in different hospitals since the hospitals will receive the same reimbursement from the Medicare department.

Why and how are they used?

MS-DRGs are used in the process of determining the system used by Medicare to reimburse the health care facilities. Considering the many numbers of these facilities, it is normally difficult to determine the number of resources being used hence the reimbursement required. These codes are therefore used to determine standard reimbursement procedures based on different diagnoses in the hospital, hence ensuring a standard reimbursement procedure that is less biased. MS-DRG’s are used to code the different ailments. Similar cases in different hospitals are accorded a similar code and the frequency of this code in the health facility is determined. A uniform cost is attached to each code ensuring that all the hospitals within the system have a standard cost system.

Who uses them?

MS-DRGs are used by medical practitioners and the administrative body of Medicare. Medical practitioners use the system to determine the cost of their services which should not differ from those of other health facilities by a big margin. This is a way of standardizing the cost of health services such that they are favorable to all categories of people. This means that all the people who are registered under Medicare can receive medication at reduced rates as compared to their non-Medicare counterparts. The other group that uses these systems are the administrators of Medicare. For them, it is simply a tool for accessing the services being offered at the health facilities and attaching value to these services. They work on the standardization procedures to ensure that the reimbursement process is fair enough for all parties involved.

History of MS-DRGs

The MS-DRGs system was developed by Robert Barclay Fetter and John D. Thompson both of Yale University. The idea behind the development of this system was stirred by the need to improve health services in terms of cost and availability. It improved the cost of medical services in the sense that health facilities were being subsidized by the government and the services that were not readily available before were made available to the people at lower costs.

These systems were first implemented in 1980 in New Jersey on a small number of hospitals belonging to various categories. This system was tested in New Jersey for three years and each year a different type of hospital was introduced to the system. At the end of this period, all the hospitals in this region had adopted the system and were being managed according to the requirements thereof.

The MS-DRG system was developed to create “a homogenous unit of hospital activity to which binding prices could be attached, a central theme being the reimbursement system that would, by constraining the hospitals, oblige their administrators to alter the behavior of the physicians and surgeons comprising their medical staff” (Health care investment analysis 2008). These systems were expected to describe the patients present in the hospital as accurately as possible.

Patients of all ages were supposed to fit in certain categories, and this included newborn babies, the elderly, expectant mothers, and adults. In 1983, the system was commissioned to other regions in the country despite several doubts on its applicability and relevance. It was decided that these doubts were irrelevant and that the good superseded the bad, hence ensuring that it would be effective. There was also room for improvements such as including a concept that left put or doing away with others that were considered not so practicable.

When the system was commissioned in 1983, HFCA was responsible for maintaining and modifying the elements therein. This was however faced with a major challenge especially in the classification of the elderly. These people were adults but, in most cases, had special needs that needed to be attended to liken to those of infants. Some for example needed feeding equipment since they were too old to feed themselves properly. These are some of the areas where frequent alterations were made as better ways of classifying this population were developed. Eventually, they were classified into their category so that all their needs and the diagnosis related to this group were treated separately.

1987 saw the passing of the legislation that enforced the MS-DRG system of payments for all hospitals. This was however difficult to enforce on the population that had not signed into the Medicare medical cover. It was determined that modifications had to be made to include these people in the program for it to be considered a national program. The research on these modifications was carried out by the New York Health Department and a conclusion has arrived at that they had to incorporate the former system.

This former system was referred to as the APDRG and the difference was that it had an allowance for high-risk practices such as organ transplants, nutritional disorders and high-risk child and mother care practices. In the year 1991, ten major MS-DRG’s were discovered, and this as stated by Ferenc included “normal newborn, vaginal delivery, heart failure, psychoses, cesarean section, neonate with significant problems, angina pectoris, specific cerebrovascular disorders, pneumonia, and hip/knee replacement” (2011, p.35). These comprised more than a third of cases reported in all hospitals.

Since then, this system has evolved and has come to be described in the words of Kennedy (2008) as “the single most influential postwar innovation in medical financing since rather than simply reimbursing hospitals whatever costs they charged to treat Medicare patients, the new model paid hospitals a predetermined, set rate based on the patient’s diagnosis” (p. 56). Over the years the system remained the same and the next major change was experienced in 2007.

This is the year the current MS-DRG was discovered, and it increased the number of ungrouped categories from 470 to around 750. Before this, the DRG groups were joined up in twos to reveal the existence of CCs (complications and comorbidities). The recent version replaced the pairing concept in aspects such as “the trifurcated design that created a tiered system of the absence of CCs, the presence of CCs and a higher level of presence of major CCs” (Schmidt & Melinda 2009).

Advantage

The first advantage is that it enables individual hospitals to build a control system of the behavior of staff at different capacities. This provides a standard for evaluating performance hence remuneration. The second advantage of MS-DRG is that it has led to an improvement in the coding procedures that were used before. Third is that this system automatically updates itself hence eliminating the need for frequent updates and data entry. Information flows directly from the hospital records to the system hence minimizing the possibilities of fraud. This system has also lessened the process of navigating through the records. It is now possible to navigate using the diagnostic category then move from there to the other categories.

Still, on the advantages, this system is easy to understand since it is based on computerized technology and any computer literate individual can understand it. The other advantage is that it is integrated with correlated information. This implies that a lot of extra information can be obtained from this system, examples of which are definitions of terms, calculators and other such resources. Besides that, it also has an automatic alert system linked to email accounts and this implies that any changes made in the connected hospitals are visible in the administrator’s email accounts. They are therefore able to stay updated and since as stated earlier on this system is automatic then alterations cannot be made, and the information obtained is considered accurate.

Disadvantage

One of the major disadvantages of MS-DRG is that it does not have a provision for non-Medicare patients. This means that patients who are not covered by Medicare are unable to benefit from this system. As a result, the cost of medication becomes explicitly high for them. These populations that are covered by Medicare are mostly the low-income earners who are unable to afford medical cover. They are the people who need assistance when it comes to medical services, yet the limitations of this system put it to be the other way round. The other limitation though stated as a benefit as well as the fact that the system is automated. Automatic systems are less prone to interference, but when the interference occurs, they will not be able to detect or handle it. This means that frauds can go unnoticed when they are committed, only that it is difficult to commit them.

Conclusion

From this discussion, we realize the evolution of the MS-DRG system has been for the improvement and automation of the system. We also note that this is a valuable tool in Medicare since it provides a base for the reimbursement process which is would otherwise be tricky owing to the corrupt nature of individuals. Hence, it is not possible to enter into deals of defrauding the organization since the resources are controlled by the system. The risk, however, lies in cases where the entire system is altered with. This can cause a huge loss since it takes time before such errors can be detected. From these facts, we can conclude that despite the many advantages of this system, we cannot overlook the disadvantages; hence caution needs to be exercised when implementing this system.

Reference List

Ferenc, D. (2011). Understanding hospital billing and coding. St. Louis, UK: Elsevier Saunders.

Health care Investment Analysis. (2008). The DRG Handbook. Cleveland, Ohio: Ernst & Young.

Kennedy, J. (2008). Severity and reimbursement: an MS-DRG primer. Chicago, Chicago: American Health Information Management Association.

Schmidt, K., & Melinda S. (2009). DRG: A comprehensive guidebook to the MS-DRG classification system. Salt lake city, Utah: Ingenix.

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