Performance Improvement 2008. How Can Diagnostic-Related Service Classifications Be Used in the Inpatient Prospective Payment System?


This study sought ways to improve Medicare payment accuracy and equity. The study evaluated alternative systems that might be used under the prospective payment system to classify discharges. This was done to support assessment of potential refinements in severity-adjusted diagnosis-related groups (DRG).

The study analyses focused on: 1) how well each classification system explained variation in resource usage; 2) whether the groupings had validity and stability; and 3) were the groupings manageable, administratively feasible and understandable? The study evaluated alternative severity-adjusted diagnosis-related grouping systems and evaluated alternative methods for determining diagnosis-related group relative weights and assessed the payment implications of the alternative methodologies.

Each severity-adjusted DRG system evaluated improved the explanatory power of the DRGs compared to the Centers for Medicare and Medicaid Services´ DRGs without severity adjustments. However, there was a trade-off between improved explanatory power and other evaluation criteria, such as validity, reliability, complexity, and potential for coding increase. No single system outperformed all others on all criteria.

Report Title: Evaluation of Severity Adjusted DRG Systems, Sponsor: CMS-ORDI, Office of Research, Development, and Information
Federal Contact: Philip Cotterill, 410-786-6598
: Rand Corporation
PIC ID: 8588

View full report


"PerformanceImprovement2008.pdf" (pdf, 1.29Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®