A lot goes into understanding the type of care a hospital provides, the community it serves, and how well it delivers care. A holistic approach to health care determines that we look at each patient as an individual with unique needs. Those needs are quantified through a Diagnosis Related Group (DRG). The collection of DRGs each hospital sees makes up the hospital Case Mix Index.
What Is the Diagnosis Related Group?
Centers for Medicare & Medicaid Services (CMS) developed the Diagnosis Related Group system in collaboration with Yale University’s Schools of Management and Public Health to define the treatment that hospitals deliver. It classifies all possible human disease diagnoses into bodily systems and then subdivides those systems into groups.
DRGs serve as the basis for Medicare’s hospital reimbursement structure. The system calculates fees by considering the damaged body systems and groups and the quantity of hospital resources needed to treat the ailment, resulting in a fixed rate for patient services.
In 1987, CMS separated the DRG system into two parts: the All-Patient DRG (AP-DRG) system, which handles non-Medicare billing, and the Medicare Severity Diagnosis Related Group (MS-DRG) system, which runs Medicare billing. Because of the expanding number of Medicare beneficiaries, MS-DRG is used most extensively today.
With the MS-DRG system, each patient discharged is assigned one of 767 DRGs, an expanded list that facilitates a potential increase in diagnosable services and provides better recognition of the severity of illness and expected hospital resource consumption than the traditional DRG system.
Each DRG code carries a significant amount of information that gets tied up into multiple levels, including:
- Anticipated patient care resources used by the hospital;
- How it relates to the estimated length of stay (LOS), the geometric mean;
- Reimbursement for the patient’s entire hospitalization;
- Relative weight for resources and costs and reimbursements versus other DRGs.
To illustrate the weight value, using a baseline of 1 for an average hospitalization, if the DRG increases to 1.5, it assumes the hospital will use 50 percent more resources. Conversely, a hospital stay with a weight of .5 would require half the resources.
The DRG system enables CMS to increase reimbursement to hospitals serving more severely ill patients; hospitals treating less severely ill patients receive lower reimbursement.
Principal and Secondary Diagnoses
Hospitals may choose from three new DRG designations in the MS-DRG system, including the Principal and Secondary Diagnoses.
The CMS Uniform Hospital Discharge Data Set defines the Principal Diagnosis as “that condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.”
Secondary diagnoses are additional conditions that affect patient care in terms of requiring at least one of the following:
- Clinical evaluations
- Therapeutic treatment
- Diagnostic procedures
- Extended LOS
- Increased nursing care and monitoring
Secondary diagnoses may be DRGs with Complication or Comorbidity (CC), with a Major Complication or Comorbidity (MCC), or with no CCs or MCCs.
Comorbidities represent conditions patients bring with them on admissions that continue to require some type of treatment or monitoring while on inpatient status. Complications are conditions acquired during hospitalization, and MCCs reflect the highest level of severity.
What Is the Case Mix Index?
CMS utilizes the Case Mix Index to set hospital reimbursement rates for Medicare and Medicaid patients. This metric indicates the variety, severity, and complexity of patient ailments handled at a specific hospital or health care center.
The Case Mix Index (CMI) is the direct calculation that ties to the DRG. Initially, CMS designed the CMI to calculate hospital payments. Now, it is a standard indicator of hospital disease severity in the United States and internationally.
CMI is calculated based on the average relative DRG weight of hospital inpatient discharges and by summing the Medicare severity DRG weight for each discharge and dividing the total by the number of discharges. This calculation reflects the severity, clinical complexity, and resource needs of all the patients in the hospital relative to other hospitals and previous years. Using a baseline of 1, like DRGs, a higher case mix index indicates a more complex and resource-intensive patient load.
Many factors can impact this metric, however, including:
- Coding accuracy
- Documentation specificity
- High volumes of highly weighted DRGs (such as organ transplantations, cardiothoracic surgeries, or neurosurgeries)
- Annual updates to relative MS-DRG weights
- Penalties for hospital-acquired conditions
Case Mix Importance to a Hospital
By documenting the complications and comorbidities accompanying a diagnosis, the hospital ensures that it assigns the correct DRG to a patient, resulting in a more accurate (and improved) CMI, a key ROI value driver.
There are at least three reasons why this is important:
- Delivering appropriate documentation guidelines and collaborating with clinical documentation specialists can significantly improve CMI accuracy for medical and surgical patients;
- CMI reflects the value of bundled DRG payments and advises on expected LOS;
- The CMI also influences quality scoring of patient outcomes by capturing the case’s complexity and ensuring more accurate reimbursement rates.
Finally, not only does the CMI play a central role in hospital finances, but it is also an important indicator of hospital performance and clinical documentation.
For example, two hospitals with similar patient populations and surgical capability might report different case mix index results. A lower CMI could imply that one hospital is documenting its cases less successfully than another, even though the patients they care for and the services they provide are virtually the same.
With the central role CMI and DRGs play for hospitals, they must be correct and accurate; therefore, the documentation from which they come must be comprehensive and precise.
As part of our health care solutions, SCP Health offers extensive management and documentation support, ensuring your DRGs and, thus, CMI correctly represents the care you deliver.