Hospital inpatient reimbursement continues to be at risk whether or not third-party payers are actively auditing for recoupment.

In addition to Medicare fee-for-service, many payers reimburse inpatient stays based on MS-DRGs or some form of DRG system. Inpatient hospitalization is a costly level of care, and hospitals need to assure that the correct DRGs are being assigned and billed to receive proper reimbursement for the conditions treated and services provided. 

While Recovery Auditors (RA) target cases at risk for overpayments, in my experience conducting MS-DRG validation audits for educational and compliance purposes, the majority of the findings are underpayments. This means that hospitals may be leaving money on the table when it comes to DRG reimbursement. It’s been said that coding, like medicine, is not an exact science. Inpatient coding professionals must read and interpret medical record documentation to determine what conditions and procedures can be coded and then make the correct code assignments, taking into consideration any index and tabular instructions, coding guidelines, or Coding Clinic advice. Throw in additional challenges such as rapidly deployed electronic medical record documentation systems (which are significantly increasing the quantity of medical record information that needs to be reviewed), a shortage in experienced coding professionals, and increasing productivity demands, and the end result could be inaccurate MS-DRG assignment.

In addition to reimbursement, correct code and DRG assignment is needed to determine quality and core measures of populations for accurate comparative data (i.e., severity of illness and risk of mortality scores) and healthcare statistics used for research and registries.

Validating correct MS-DRG assignment in ICD-9 also will prepare coding professionals for getting it right in ICD-10. Many of the lessons learned from MS-DRG validation in ICD-9 will carry over to ICD-10 (i.e., principal diagnosis selection, sequencing, linking of conditions, clinical validation, application of coding guidelines, etc.). If correct code and MS-DRG assignment isn’t happening in ICD-9, chances are it won’t be happening in ICD-10 either.

Hospitals have options when it comes to MS-DRG validation. They may choose to use internal staff or contract with an outside vendor. The validation can be done pre-bill (after final coding but prior to billing the inpatient claim) or post-payment, after the inpatient claim has already been paid.  For hospitals that outsource their coding, the outsourcing company should have an internal coding quality review process – and hospitals should confirm this. It still also would be beneficial to periodically conduct or contract for independent MS-DRG validation. 

No matter what form or fashion MS-DRG validation is being performed, the findings should be trended and followed up on to prevent future errors. Opportunities for improvements identified may be related to coding education (i.e., adherence to coding guidelines, knowledge of disease processes or surgical techniques, etc.), physician documentation, electronic medical records (i.e., identifying revisions needed to templates, canned text, problem lists, etc.), processes such as final coding without a discharge summary or combining of accounts for billing purposes, as well as system issues related to the flow of data from registration to coding/abstracting to billing systems. 

MS-DRG validation audits also may provide insight into what is working well so those actions can be recognized and repeated.  In the end, the goal is to receive proper DRG reimbursement for the inpatient services provided. 

Taking the time and effort to periodically assess MS-DRG accuracy and investigate the cases that fall short will increase the chances of getting it right upfront for similar cases in the future.

About the Author

Sandra Routhier is an independent HIM and coding consultant. She has more than 25 years of experience in health information management, revenue cycle, project management, and information systems. Sandra is a Registered Health Information Administrator, Certified Coding Specialist, and Approved ICD-10-CM/PCS Trainer through the American Health Information Management Association.

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