Change in MS-DRG assignment and hospital reimbursement as a result of Centers for Medicare & Medicaid changes in payment for hospital-acquired conditions: is it coding or quality?

Context: In October 2008, the Centers for Medicare & Medicaid Services reduced payments to hospitals for a group of hospital-acquired conditions (HACs) not documented as present on admission (POA). It is unknown what proportion of Medicare severity diagnosis related group (MS-DRG) assignments will change when the International Classification of Disease, 9th Revision, Clinical Modification (ICD-9-CM) diagnosis code for the HAC is not taken into account even before considering the POA status.

Objectives: The primary objectives were to estimate the proportion of cases that change MS-DRG assignment when HACs are removed from the calculation, the subsequent changes in reimbursement to hospitals, and the attenuation in changes in MS-DRG assignment after factoring in those that may be POA. Last, we explored the effect of the numbers of ICD-9-CM diagnosis codes on MS-DRG assignment.

Methods: We obtained 2 years of discharge data from academic medical centers that were members of the University Health System Consortium and identified all cases with 1 of 7 HACs coded through ICD-9-CM diagnosis codes. We calculated the MS-DRG for each case with and without the HAC and, hence, the proportion where MS-DRG assignment changed. Next, we used a bootstrap method to calculate the range in the proportion of cases changing assignment to account for POA status. Changes in reimbursement were estimated by using the 2008 MS-DRG weights payment formula.

Results: Of 184,932 cases with at least 1 HAC, 27.6% (n = 52,272) would experience a change in MS-DRG assignment without the HAC factored into the assignment. After taking into account those conditions that were potentially POA, 7.5% (n = 14,176) of the original cases would change MS-DRG assignment, with an average loss in reimbursement per case ranging from $1548 with a catheter-associated urinary tract infection to $7310 for a surgical site infection. These reductions would translate into a total reimbursement loss of $50 261,692 (range: $38 330,747-$62 344,360) for the 86 academic medical centers. Those cases, for all conditions, with reductions in payment also have fewer additional ICD-9-CM codes associated.

Conclusions: Removing HACs from MS-DRG assignment may result in significant cost savings for the Centers for Medicare & Medicaid Services through reduced payment to hospitals. As more conditions are added, the negative impact on hospital reimbursement may become greater. However, it is possible that variation in coding practice may affect cost savings and not reflect true differences in quality of care.