Working With MS-DRGs and HIPAA

Vol. 17 •Issue 23 • Page 20
Working With MS-DRGs and HIPAA

Can you meet CMS’s expected changes in coding practices and still be HIPAA compliant?

The Centers for Medicare and Medicaid Services (CMS) has stated in both the proposed and final FY2008 inpatient prospective payment system (IPPS) regulations1 that they expect coding practices to change with the implementation of MS-DRGs. These changes will result in an improvement in coding and documentation practices. They will also optimize MS-DRG assignments resulting in hospitals having a higher Medicare case mix than they did in DRGs.

To offset this expected increase in reimbursement due to expected changes in coding practices CMS is reducing hospital base rates by .6 percent in FY2008 and plans to reduce them further in FY2009 and FY2010.2

HIPAA History

HIPAA3 set forth specific programs to control health care fraud and abuse. Much of the focus was on the submission of accurate claims for health care services. The act placed accountability and responsibility on hospitals to submit correct claims.

In 1998 the Office of Inspector General (OIG) published the OIG Compliance Program Guidance for Hospitals in the Federal Register.4 This guidance emphasized the need for hospital departments responsible for billing, including HIM, to ensure their data was accurate prior to bill submission, thus eliminating the need for rebilling of incorrect data.

Both of these OIG initiatives were in part due to the discovery by the OIG that some hospitals were deliberately upcoding inpatient Medicare cases to maximize DRG payment. Some of the OIG’s findings are reported in Office of Examinations and Inspections report “Using Software to Detect Upcoding of Hospital Bills.”5 This report listed several DRGs with high potential for upcoding including DRG 79, Respiratory Infections; DRG 416, Septicemia; and DRG 14, Specific Cerebrovascular Disorders. Since then at least 25 other DRGs have been added to what many refer to as the “high risk” group of DRGs. These DRGs have been the focus of hospital internal and external monitoring to ensure the coding is complete and accurate and supported by physician documentation in the medical record.

External audits of hospital coding by the OIG have resulted in the collection of hundreds of millions of dollars in monetary settlements related to potential upcoding.

FY2008 IPPS Final Rule

Since 1983, hospitals have been reimbursed for Medicare inpatient care under the Medicare IPPS that determined payments per case based on DRGs. As of Oct. 1, DRGs were replaced with Medicare Severity Diagnosis Related Groups (MS-DRGs), expanding the number of active DRGs from 538 to 745.

The rationale for shifting from the DRGs to a severity-adjusted DRG scheme was to better explain variation in cost of care for similar diagnoses and/or procedures. The RAND Corporation has stated that the MS-DRGs improve the explanation of cost variation by 9.1 percent over the current CMS DRGs.6

Major Changes in CC List

Part of this improvement in cost variation is the result of a complete revamping of the complication/comorbidity (CC) list for additional diagnoses. CMS had not made significant changes to this list since DRGs were implemented in 1983. During the development of MS-DRGs each of 10,6907 ICD-9-CM diagnoses were evaluated to determine whether they made a significant difference in terms of cost of care with each DRG.

In addition, CMS determined that certain CCs had even greater impact on explaining cost variation than others; therefore, they created a second level of CCs, called Major CCs (MCCs).

In DRGs, 3,326 diagnosis codes were CCs. In MS-DRGs 2,913 ICD-9-CM diagnosis codes are CCs, and 1,389 codes are MCCs. These diagnoses represent significant acute diseases, acute exacerbations of significant chronic diseases, advanced or end stage chronic diseases and chronic diseases associated with extensive debility.

Table 1 shows the configuration of the MS-DRGs. More than 90 percent of the valid MS-DRGs split based on the presence or absence of MCCs, CCs and CC/MCCs.

CMS assigned MS-DRGs to the FY2006 MedPAR discharges. This data was displayed on pages 48115-48126 of the FY2008 IPPS Final Regulations published in the Federal Register Aug. 22, 2007.9 Of the 11,795,587 discharges, only 1,172,481, or less than 1 percent, did not split based on the presence or absence of an MCC or CC.

Expected Changes in Coding Practices

An example of these changes in coding practices is largely due to the major changes in the MCC and CC lists. For example none of the common additional diagnoses below will be MCCs or CCs in MS-DRGs; however, they have been among the most common CCs in DRGs for 24 years.

  • Congestive heart failure 428.0
  • COPD 496
  • 2nd degree AV Block 426.13
  • Atrial fibrillation 427.31
  • CVA 436

    The expected changes in coding practices will occur when coders query physicians to determine whether a more specific description of these diagnoses exists such as:

  • Acute systolic heart failure 428.21 MCC
  • Chronic systolic heart failure 428.22 CC
  • Intrinsic asthma with status asthmaticus 493.11 CC
  • Complete AV block 426.0 CC
  • Atrial flutter 427.32 CC
  • Ventricular flutter 427.42 MCC
  • Cerebral thrombosis with infarction 434.01 MCC

    HIPAA Compliance

    Querying physicians for more specific terminology of an already documented diagnosis differs from queries used in the past to ask a physician whether a diagnosis should be documented based on abnormal findings of diagnostic reports in the record. To be HIPAA compliant, the coder was instructed not to “lead” the physician to document a specific diagnosis.

    With MS-DRGs, when the physician has already documented a non-specific diagnosis such as chronic obstructive pulmonary disease (COPD), the coder should be able to present all of the common more specific terminology in ICD-9-CM to the physician to assist him or her in determining whether a more specific term better describes COPD. Table 2 lists more specific terminology for COPD in categories 490-494. There are 13 of the 24 codes that are not MCCs or CCs in MS-DRGs; however, their descriptions of COPD are more specific and should be provided to the physician in the query.

    The implementation of MS-DRGs will require that coders change their coding practices and that physicians be more specific in describing diagnoses. Coders should be able to present lists of more specific terms for diagnoses already documented by physicians. If these diagnosis lists do not identify whether the code is an MCC, CC or no CC, and all of the common more specific terminology is included, the coder can change coding practices and still be HIPAA compliant.


    1. CMS 42 CFR Parts 4511,412,413 and 4389 Medicare Program; Changes to the Hospital IPPS and FY2008 Rates; Final Rule (47175-47186).

    2. CMS 42 CFR Parts 4511,412,413 and 4389 Medicare Program; Changes to the Hospital IPPS and FY2008 Rates; Final Rule (47186). Retrieved on Sept. 25, 2007.

    4. Retrieved on Sept. 25, 2007.

    5.Office of Examinations and Inspections report “Using Software to Detect Upcoding of Hospital Bills” (OEI-01-97-00010).

    6.Evaluation of Severity-Adjusted DRG Systems ( =MS-DRGs&Go=Search). Retrieved on Sept. 4, 2007

    7.Excluding E-codes and congenital anomaly codes.

    8.Obstetrical and Neonate MS-DRGs 774,775, 781,782, 791,792, 793 and 794 are included in the No Split group.

    9.CMS 42 CFR Parts 4511,412,413, and 4389 Medicare Program; Changes to the Hospital IPPS and FY2008 Rates; Final Rule (48115-48126).

    Lois Kelley is vice president coding, and Minnette Terlep is vice president business development and corporate compliance officer at Amphion Medical Solutions in Madison, WI.