OIG report finds DRG 014 overpayment trend

Targeted hospitals will be investigated

A government report released by the Office of The Inspector General (OIG) in Washington, DC, this summer1 found that 35 hospitals had "abnormally high" rates of the diagnosis related group (DRG) 014 code compared to national figures.

DRG 014 is used when patients have principal diagnoses that include cerebrovascular accident and intracerebral hemorrhage.

The Health Care Financing Administration (HCFA) contracts with two clinical data abstraction centers to collect this clinical data from hospital medical records. The centers validate a random sample of claims from all Medicare inpatient hospital discharges.

Results of 1996 validation work found that 4% of DRG 014 discharge samples should have been coded to a lower-weighted DRG. The OIG then analyzed the Medicare Provider Analysis and Review file to identify hospitals with unusually high billings in fiscal years 1993 to 1996.

Exceeded the national norm

The OIG review found 35 out of 4,883 hospitals that had a large proportion of DRG 014 discharges to total discharges in 1996 and a significant increase in the proportion of DRG 014 discharges to total discharges between 1993 and 1996.

The 35 hospitals exceeded the national norms of the number of DRG 014 discharges by 1,403 cases. Using an average per discharge difference of $1,716, the OIG estimates that the potential overpayments could be as high as $2.4 million or 14% of the $16.6 million paid to these hospitals in 1996.

The 35 hospitals have been referred to the OIG’s Office of Investigations.

Earlier this year in a report to HCFA, Inspector General June Gibbs-Brown expressed concern about the potential for abuse of the DRG system and about HCFA’s oversight of the accuracy of the DRG coding system.2 "The DRG system is vulnerable to abuse by providers who wish to increase reimbursement inappropriately through upcoding, particularly so within certain DRGs," the inspector general said. These DRGs included 014, DRG 79 (respiratory infections), and DRG 416 (septicemia).

The OIG found that in a focused sample of 299 hospitals, the average rate of upcoding was not statistically different from the average downcoding rate. Those hospitals that computer software predicted would have a high rate of upcoding, though, had an average upcoding rate of more than twice that of downcoding. To the OIG, the difference indicated instances of intentional abuse by some providers.

In the report, the OIG also recommended that HCFA perform "routine monitoring and analysis of hospital billing data and clinical data to proactively identify aberrant patterns of upcoding." Since the publication of the report, HCFA has agreed to this recommendation.


1. Office of The Inspector General. Medicare Payments for DRG 014: Specific Cerebrovascular Disorders Except Transient Ischemic Attack. OEI-03-99-00240. Washington, DC; July 1999.

2. Office of The Inspector General. Monitoring the Accuracy of Hospital Coding. OEI-01-98-00420. Washington, DC; January 1999.