Diagnosis Related Group (DRG)

A diagnosis-related group (DRG) is a patient classification system that standardizes prospective payment to hospitals and encourages cost containment initiatives.

In general, a DRG payment covers all charges associated with an inpatient stay from the time of admission to discharge. The DRG includes any services performed by an outside provider.

Claims for the inpatient stay are submitted and processed for payment only upon discharge.

DRG Assignments

DRGs categorize patients with respect to diagnosis, treatment and length of hospital stay. The assignment of a DRG depends on the following variables:

• Principal diagnosis
• Secondary diagnosis(es)
• Surgical procedures performed
• Comorbidities and complications
• Patient's age and sex
• Discharge status

Outliers

DRG payment is based on the care given to and resources used by a "typical" patient within the group. When the cost of treating a specific patient is unusually high compared to a typical patient in the same DRG classification, the case is referred to as an outlier.

Many facility contracts include provisions employing a different methodology of calculating payment in outlier situations. When a facility contract includes a DRG outlier provision, outlier cases processed under the provisions are identified by an outlier threshold based on covered charges. Providers should refer to their facility's Participating Agreement for details on the outlier threshold and payment methodology as it applies to their facility.

Grouper

A grouper is a software program designed to assign the DRG classification. HMSA's grouper uses the same DRG case designation categories as Medicare, as defined in the annual Inpatient Prospective Payment System (IPPS) Final Rule.

Note: Annual ICD-9-CM/ICD-10-CM updates are effective each October. The DRG grouper is updated at this time.

HMSA and DRGs History

DRGs were first implemented nationwide by the Health Care Financing Administration (HCFA) to help control costs for inpatient services billed to Medicare. HMSA first began using DRGs when the Preferred Provider Plan was developed in 1989 and gradually implemented DRGs for other HMSA plans.

HMSA DRG Classifications

Providers should refer to the facility contract's Participating Agreement for specific information about HMSA's reimbursement methodology and definition for DRG cases.

As each claim is processed, the member's copayment is deducted from the DRG eligible charge. The remaining amount is HMSA's DRG payment. This payment plus the member copayment represents payment in full to the hospital.

Note: Charges for non-covered services, such as personal care and convenience items, are the member's responsibility. These charges should be billed to the member along with the member's copayment.

Payment Schedule

HMSA's DRG Payment schedule for the current year is included in the facility's Participating Agreement. Although the DRG grouper is updated on October 1 each year due, concurrent with changes to the ICD coding manual, the payment schedule is updated according to the facility's Participating Agreement.

HMSA reserves the right to update the DRG payment schedule at other times during the year as necessary.

Exceptions

In exceptional cases, where there is no DRG rate for the case, HMSA will pay covered services at 78 percent of covered charges. These exceptions are outlined in the facility's Participating Agreement.

Reference Guides

For more information about the DRG classification system, the DRG Expert: A Comprehensive Reference to the DRG Classification System is available online from OPTUM at www.medicalcodingbooks.com.

Another reference, the DRG Desk Reference, allows the customer to access information needed to establish DRG assignment, audit assigned DRGs and train staff in assigning and auditing DRGs. This book is also available online from OPTUM.

Revision History