Documentation is more important than ever under MS-DRGs

System captures severity level with CCs and major CCs

Now that the Centers for Medicare & Medicaid Services (CMS) made the decision to replace the current DRG system with the Medicare Severity-DRG (MS-DRG) system for reimbursement, hospitals will be challenged to provide accurate documentation of patient conditions in order to receive the correct reimbursement, says Deborah Hale, CSS, president of Administrative Consultant Services Inc., a health care consulting firm based in Shawnee, OK.

"If case managers are responsible for documentation improvement, they need to understand the changes in the system and familiarize themselves with the new MS-DRGs. Continuing the same practices as in the past is likely to result in disaster," Hale adds.

The shift to the MS-DRG system for reimbursement is the first major revision to the inpatient prospective payment system since it was implemented in 1983. The new system replaces 538 DRGs with 745 new MS-DRGs to more accurately reflect the severity of each patient's condition and creates a distinction between severity levels by separating major comorbidities and complications from comorbidities and complications.

In addition, the final rule takes steps to ensure that Medicare no longer pays for the additional cost of some preventable conditions acquired in the hospital and expands the list of publicly reported quality measures to 27. Hospitals must track and report on all the measures in order to receive the full payment update.

In a surprising move when it issued its proposed rule for 2008 in April, CMS announced its intention to use the MS-DRG system instead of any of the five other severity-adjusted DRG systems being evaluated by the Rand Corp.

The agency asked Rand to evaluate the MS-DRG system using the same criteria applied to other DRG systems and did not rule out switching to an entirely different payment system for fiscal year 2009.

Based on Rand's analysis and strong support for the MS-DRGs among the 900 comments it received on its proposed rule, CMS announced that it anticipates adopting the MS-DRG system for long-term use.

"We plan on using Rand's report to further refine and improve the Medicare inpatient payment system and expect that any future refinements will be based on the MS-DRG," CMS stated in its final rule.

Despite suggestions to the contrary, CMS ruled out delaying the implementation of the MS-DRGs but is phasing in the financial impact of the new system by blending the relative weights for this year with those proposed under the MS-DRGs.

By better recognizing severity of illness, MS-DRGs shift payments from the less expensive to the more expensive cases. Under the MS-DRGs, urban hospitals, which typically treat more severely ill patients, will have a higher case mix index, and rural hospitals, which tend to treat less severely ill patients, will be likely to have a lower case mix index.

"The financial impact for some hospitals will be significant. Those who lose money the first year are likely to lose a whole lot more," Hale says.

The MS-DRG system renumbers DRGs hospitals have become accustomed to and splits base DRGs into three categories: MCC — major complication/comorbidity; CC — complication/comorbidity; and non-CC — neither of the above.

"The DRG numbers we've know all these years will not be recognizable. The base DRGs will remain the same but most are split into classifications," Hale says.

For instance, DRG 127 (congestive heart failure, or CHF) has been replaced by three MS-DRGs: MS-DRG 293 (CHF without a CC), MS-DRG 292 (CHF with CC), and DRG 291 (CHF with MCC).

Here's an example of how documentation could affect reimbursement for one hospital:

In the old system, reimbursement to a typical community hospital for congestive heart failure was $5,776. Under the MS-DRG system, reimbursement for DRG 29 is $4,024; DRG 292 would be $5,618; and DRG 291 would be $8,167. (Payment calculations are based on a hospital-specific rate of $5,500.)

CC list revised

Aside from a totally new numbering system, the most significant change in the 2008 final rule is that the CC list has been completely revised, Hale points out.

Many CCs have been eliminated. These include: uncontrolled diabetes, dehydration, angina pectoris, atrial fibrillation, chronic obstructive pulmonary disease, urinary tract infection, chronic renal insufficiency, and acute/chronic blood loss anemia.

The revised CC list comprises significant acute diseases, acute exacerbations of significant chronic illnesses, advanced or end-stage chronic diseases, and chronic diseases associated with extensive debility.

These include cases that require intensive monitoring, such as an ICU stay; expensive and technically complex services, such as a heart transplant; or extensive care requiring a greater number of caregivers, such as care for a quadriplegic.

The revised CC list was developed to distinguish cases more likely to increase hospital resources due to a secondary diagnosis and includes only conditions that would substantially increase resource consumption. For instance, mitral valve diseases are now a CC but unless they are associated with other diagnoses, such as congestive heart failure or respiratory failure, they wouldn't be expected to increase hospital resource cost, according to CMS.

"When the DRG system was implemented in 1983, people were admitted to the hospital for conditions that would be treated on an outpatient basis today. Now, patients have a higher severity of illness and the old CC list doesn't accurately reflect the amount of care patients need today," Hale says.

In fact, CMS cites MEDPAR data that show that, based on the current list, 77.66% of all patients admitted have at least one CC. Based on the revised list, the figure drops to 40.34%.

Assuring that the patient's medical record has all the documentation to back up the DRG will be crucial with the MS-DRGs and will necessitate documentation that wasn't required in the past, Hale says.

"The MCCs have the highest weight for severity of illness, and in some cases, require documentation that we haven't tried to get in the past because it didn't make a difference," Hale says.

For instance, among gastrointestinal disorders in the MS-DRG system, gastritis is a non-CC, blood in stool and GI bleed are CCs, and GI bleed due to gastritis is a major CC.

When congestive heart failure is a comorbidity, detailed documentation will be necessary for the condition to count as a CC or an MCC.

If a physician writes just "congestive heart failure" or "heart failure," the condition is a non-CC. For the condition to count as an MCC, it would have to be specifically documented "acute systolic heart failure," "acute systolic and diastolic heart failure," "acute on chronic systolic heart failure," "acute diastolic heart failure," or "acute on chronic diastolic heart failure."

Conditions that count as a CC include "left heart failure," "systolic heart failure" (not otherwise specified), "chronic systolic heart failure," "chronic diastolic heart failure," and "systolic and diastolic heart failure."

"Physicians rarely document anything other than 'congestive heart failure.' Further documentation hasn't been necessary in the past but it can have a huge impact on reimbursement with the MS-DRGs," Hale says.

Case managers can play a role in helping physicians identify the documentation terminology that needs to change and to help walk them through it, Hale adds.

The only way to know if diagnosis is an MCC or a CC is to look at the list, Hale points out. Case managers should identify their hospital's top DRGs and focus on them. Look at the corresponding MS-DRGs, see what has changed, and identify the opportunities where documentation can be improved, Hale suggests.

"Every one of them is different. There's not anything that's not important to look at. If a hospital has a lot of patients in a particular DRG, case managers should make sure they understand the documentation for that DRG," Hale says.

(For more information, contact Deborah Hale, CSS, president of Administrative Consultant Services Inc., e-mail:

To review the final rule document, see The list of the new MS-DRGs begins on page 1,375. The list of the CCs and MCCs is available in the proposed rule at: Table 6J "Major Complications and Comorbidities List" begins on page 882. Table 6K "Complication and Comorbidity List" begins on page 940.)