South Florida Hospital News
Thursday August 13, 2020

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September 2008 - Volume 5 - Issue 3


MS-DRGs: Success Requires a Focused Clinical Documentation Improvement Effort

In October 2007, version 25 of the DRG system was implemented as the methodology for reimbursement for inpatient Medicare hospital stays. This revision is much more dramatic than previous revisions to the Inpatient Prospective Payment System which was originally introduced in the early 1980ís. After 22 years of this consultantís experience with every iteration of the DRG, this one poses the most risk to our hospitals.

Some of the components of MS-DRGs final rules include:

  • A resequencing of the groups of DRGs (i.e."ungoupable" is no longer DRG 470 but is now DRG 999)
  • There are now 745 DRGs as opposed to the previous 538 DRGs.
  • The DRG "pairs" of complicated versus non complicated DRGs have been replaced by a tiered severity system which includes the absence of a CC (complication/comorbidity), the presence of a CC or the presence of a Major CC.
  • There are hospital required reporting requirements in FY í08 in order to qualify for the market basket update in FY í09.
  • There is a shift from DRG weights based on hospital charges to hospital costs.
  • The high cost outlier threshold is now $22,650 down from $24,458.
  • Hospitals are required to report eight preventable admission conditions that would not be paid at a higher rate unless present on admission.
These changes are expected to result in a dramatic redistribution of dollars among hospitals. Some hospitals will benefit and some are expected to suffer a significant downturn in revenue. Nonetheless, the impact can be managed and moderated by a concerted and focused effort.


The challenges to survive under the impact of MS-DRGs rest at the door of multiple hospital departments. This is not a "coding" problem!! Finance, IT, Admitting, ER staff, Medical Staff, Nursing, Admitting as well as HIM and Coding have work to do. An essential ingredient to success under MS-DRGs is a Clinical Documentation Improvement Process which can have a very dramatic effect on revenue under DRGs.


One very successful Clinical Documentation Improvement effort for which this consultantís firm was engaged was at the University of Michigan Health System (UMHS). The process and the reported revenue impact of $13 million were presented by UMHS staff at an AHIMA conference as well as in their journal.

The critical aspects of this improvement effort included first, gaining an understanding of the clinical data collection and management process. Clinical data which supports a more accurate DRG assignment is often collected by a variety of clinical staff and often stored in places other than the medical record. Understanding where clinical data can be obtained is a crucial step in the clinical documentation improvement process.

Next, a support system for obtaining critical clinical documentation at the point of care is essential. Physicians canít be expected to remember all the conditions that drive the DRG assignment. In fact, some of the conditions which register as CCs do not rank high as clinically important with the physicians. However, physicians are most often receptive to a "front end" query process by trained staff who are viewed as a part of the team. This is a much more successful method of obtaining critical information about a patient than two or three weeks after the patient is discharged and the physician has a whole new cadre of inpatients for whom he/she is caring. Pocket cards with documentation "tips" on commonly missed CCs specific to that physicianís service were also found to be useful.

In addition, the engagement of the Nursing staff as members of the Clinical Documentation Improvement Team was critical as they have a great deal to contribute to the identification of all aspects of the patient condition.

DRGs continue to evolve and present new challenges. Although much can be learned about the potential financial impact of these challenges by a review of data and reports, the true cure can only be achieved by creating a clinical documentation team and process that assures the collection of a comprehensive clinical data set in order to optimize reimbursement for the severity of the patients treated.

Cathy Idema is the President of Health Systems Management Network a national, Florida based consulting firm specializing in clinical documentation and operations improvements driving the revenue cycle. She can be reached at (866) 908-4226 or or visit
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