Coding changes could affect benchmarking

New DRG system may be imminent

Potential changes in DRG coding and a proposal to move from ICD-9 to ICD-10 could significantly affect quality managers, especially in the area of benchmarking, and will make proper coding even more critical to hospital reimbursement, say coding experts.

"CMS [the Centers for Medicare & Medicaid Services] has been proposing for a year to move to a severity-adjusted DRG system," notes Deborah K. Hale, CCS, president of Administrative Consultant Service, LLC, in Shawnee, OK. "The current system of DRGs does not provide a clear picture of severity of illness; the changes would be designed to help pay hospitals more appropriately based on costs and to make a better delineation of actual severity of illness."

"The proposed rules are out, and the comment period is over," adds Susan Wallace, Hale's director of inpatient compliance. "The final rule will be published the first week in August, with implementation set for October 1."

The "earliest possible time frame for ICD-10 coding is October 2009, says Hale. "It will require hospitals to be more tuned in to documentation of quality improvement activity," she says. "More specifically, the way a physician documents can more positively impact reimbursement; in many instances hospitals get higher pay for quality, and ICD-10 will allow the coder to assign more specific codes. Many times that also impacts the benchmark data."

Judy Sturgeon, CCS, hospital coding manager at University of Texas Medical Branch in Galveston, agrees. "The way I understand it, an awful lot of health care benchmarking and indicators are based either on diagnosis and procedures for high risk conditions, or on DRGs that are CMS-driven as core measures, such as CHF," she says.

DRGs: More immediate impact

Clearly, the new DRG system will have a more immediate impact on quality professionals. "We currently have 527 active DRGs," notes Hale. "There are two proposed new methodologies – one a proprietary system by 3M [APR-DRG], which has over 1,258, and a severity refined system proposed by CMS [CSA-DRG] that is very similar — with 861 DRGs."

"The CSA codes are based on the 3M system, but they looked at the volume of patients within the Medicare population," notes Wallace. "They are consolidated in areas where there is not a lot of volume, so where 3M might have four different codes, CMS might report only one." In addition, she says, 3M adjusts for risk of mortality, which CMS has not addressed.

It's unclear which system will be selected. "CMS could choose to go with 3M instead of their own," says Hale. "It would mean every hospital in the country, in order to code and group correctly, would have to have the 3M system. If CMS uses their model, all the vendors would have to get together and develop to the software product; October 1 is an incredibly short period of time. We think most likely it will be delayed until October 1, 2007, but they also possibly could do it by mid-year."

How will this affect quality managers? "The savvy QI coordinator, and one who does a lot of benchmarking, will identify the [new] DRGs in which the mortality rate is higher than would be expected; examine costs of care; LOS; costs per case; and may even look at charges per case," Hale advises. "If they are benchmarking, as they should be doing, they will look at those performance measures and see where opportunities for improvement are. These new DRG methodologies will give them better data."

If the physician is not documenting properly and/or if the hospital is not coding in a way to get full credit, she warns, "their data are going to be skewed; but the new system will give them a much better, more accurate picture."

"The people who do reporting and questioning are going to have to learn new sets of data," adds Sturgeon. "The coding rules will not change, but how they group them into severity adjusted areas will, so all report forms, queries, and analyses will have to be reformatted. From now on, a CHF patient is not going to be just any CHF patient."

Astute quality managers, she continues, will need to "learn the new code set for ICD-10, and the differences between the new severity adjusted DRGs versus reimbursement DRGs."

These changes ultimately can be beneficial to quality managers, she continues. "As in our CHF example, if you are looking at the core measures and trying to find out why your CHF stays are longer than those at other hospitals, you will now have severity-adjusted data that split up them. That data may support the fact that you have higher severity compared to other facilities with the same principal diagnosis."

The new codes also will provide handy tools to identify problems, Sturgeon continues. "Say your report suddenly shows patients with low severity illnesses are staying too long — or those with high severity illnesses are not staying long enough," she poses. "It could be a coding issue, a quality of care issue, a medication compliance issue; it will make you look closer to get to the answer. This way, you can spot problems upfront — before they come onto Medicare's radar."

The bottom line, she concludes, is that these proposed changes mean "new education for anybody who runs reports, who asks for the reports, or who analyzes the data. You have to know what you're asking for to get what you want; you have to know how things are entered into the system if you are setting up program reports. If you make a decision off of the data, you have to understand what the new data mean or you will draw erroneous conclusions."

For more information, contact:

Deborah K. Hale, CCS, President, Susan Wallace, Director of Inpatient Compliance, Administrative Consultant Service, LLC, Shawnee, OK. Phone: (405) 878-0118. Internet: E-mail:

Judy Sturgeon, CCS, Hospital Coding Manager, University of Texas Medical Branch, Galveston. Phone: (409) 772-2943.