How DRGs Work
Medicare Severity Diagnosis Related Groups, or MS-DRGs, classify inpatient stays into groups expected to require similar hospital resources, forming the basis of Medicare's inpatient prospective payment system. Assignment depends on the principal diagnosis, principal procedure if applicable, presence of complications or comorbidities, discharge disposition, and in some cases patient age or sex.
Complications and Comorbidities
Many DRGs are split into three tiers based on secondary diagnoses: MCC, meaning major complication or comorbidity, CC, meaning complication or comorbidity, and no CC/MCC. Capturing an MCC or CC accurately, when clinically documented and supported, moves the stay into a higher weighted DRG, reflecting the increased resource intensity of a more complex patient.
Calculating Case Mix Index
Case mix index, or CMI, is calculated by summing the relative weights of all DRGs for a given period and dividing by the total number of discharges. A higher CMI indicates a more resource intensive, complex patient population, and directly affects the facility's average Medicare reimbursement per discharge, since each DRG relative weight is multiplied by the hospital's base payment rate.
Grouper Logic and MDCs
DRGs are organized under twenty five Major Diagnostic Categories, or MDCs, generally corresponding to a single organ system or etiology. The grouper software applies principal diagnosis, procedures, and secondary diagnoses through a defined logic tree to arrive at the final DRG assignment.
Data Quality and Compliance Risk
Because DRG assignment directly determines payment, accuracy is both a data quality and compliance concern. Upcoding, meaning assigning a code not supported by documentation to increase reimbursement, and undercoding, meaning failing to capture legitimate complications, are both compliance risks. Clinical documentation improvement programs exist specifically to close the gap between what is clinically true and what is documented and coded, without crossing into inappropriate code assignment.
Impact of Discharge Disposition
Discharge disposition affects payment under certain DRGs subject to post acute care transfer policies, where a hospital may receive a reduced, per diem based payment if a patient is transferred to a post acute setting rather than discharged home, for specific qualifying DRGs.
Exam Tip
When calculating case mix index in a practice problem, always divide the sum of relative weights by the number of discharges, not the number of admissions, and double check that every discharge in the data set is included in both the numerator and denominator.