Diagnosis-related group

Diagnosis-related group (DRG) is a system to classify hospital cases into one of originally 467 groups, with the last group (coded as 470 through v24, 999 thereafter) being 'Ungroupable'. This system of classification was developed as a collaborative project by Robert B Fetter, PhD, of the Yale School of Management, and John D. Thompson, MPH, of the Yale School of Public Health. The system is also referred to as 'the DRGs', and its intent was to identify the 'products' that a hospital provides. One example of a 'product' is an appendectomy. The system was developed in anticipation of convincing Congress to use it for reimbursement, to replace 'cost based' reimbursement that had been used up to that point. DRGs are assigned by a 'grouper' program based on ICD (International Classification of Diseases) diagnoses, procedures, age, sex, discharge status, and the presence of complications or comorbidities. DRGs have been used in the US since 1982 to determine how much Medicare pays the hospital for each 'product', since patients within each category are clinically similar and are expected to use the same level of hospital resources. DRGs may be further grouped into Major Diagnostic Categories (MDCs). DRGs are also standard practice for establishing reimbursements for other Medicare related reimbursements such as to home healthcare providers....the single most influential postwar innovation in medical financing: Medicare's prospective payment system (PPS). Inexorably rising medical inflation and deep economic deterioration forced policymakers in the late 1970s to pursue radical reform of Medicare to keep the program from insolvency. Congress and the Reagan administration eventually turned to the one alternative reimbursement system that analysts and academics had studied more than any other and had even tested with apparent success in New Jersey: prospective payment with diagnosis-related groups (DRGs). Rather than simply reimbursing hospitals whatever costs they charged to treat Medicare patients, the new model paid hospitals a predetermined, set rate based on the patient's diagnosis. The most significant change in health policy since Medicare and Medicaid's passage in 1965 went virtually unnoticed by the general public. Nevertheless, the change was nothing short of revolutionary. For the first time, the federal government gained the upper hand in its financial relationship with the hospital industry. Medicare's new prospective payment system with DRGs triggered a shift in the balance of political and economic power between the providers of medical care (hospitals and physicians) and those who paid for it - power that providers had successfully accumulated for more than half a century.Before the introduction of version 25, many CMS DRG classifications were 'paired' to reflect the presence of complications or comorbidities (CCs). A significant refinement of version 25 was to replace this pairing, in many instances, with a trifurcated design that created a tiered system of the absence of CCs, the presence of CCs, and a higher level of presence of Major CCs. As a result of this change, the historical list of diagnoses that qualified for membership on the CC list was substantially redefined and replaced with a new standard CC list and a new Major CC list. Diagnosis-related group (DRG) is a system to classify hospital cases into one of originally 467 groups, with the last group (coded as 470 through v24, 999 thereafter) being 'Ungroupable'. This system of classification was developed as a collaborative project by Robert B Fetter, PhD, of the Yale School of Management, and John D. Thompson, MPH, of the Yale School of Public Health. The system is also referred to as 'the DRGs', and its intent was to identify the 'products' that a hospital provides. One example of a 'product' is an appendectomy. The system was developed in anticipation of convincing Congress to use it for reimbursement, to replace 'cost based' reimbursement that had been used up to that point. DRGs are assigned by a 'grouper' program based on ICD (International Classification of Diseases) diagnoses, procedures, age, sex, discharge status, and the presence of complications or comorbidities. DRGs have been used in the US since 1982 to determine how much Medicare pays the hospital for each 'product', since patients within each category are clinically similar and are expected to use the same level of hospital resources. DRGs may be further grouped into Major Diagnostic Categories (MDCs). DRGs are also standard practice for establishing reimbursements for other Medicare related reimbursements such as to home healthcare providers. The original objective of diagnosis related groups (DRG) was to develop a classification system that identified the 'products' that the patient received. Since the introduction of DRGs in the early 1980s, the healthcare industry has evolved and developed an increased demand for a patient classification system that can serve its original objective at a higher level of sophistication and precision. To meet those evolving needs, the objective of the DRG system had to expand in scope. Today, there are several different DRG systems that have been developed in the US. They include: As of 2003, the top 10 DRGs accounted for almost 30% of acute hospital admissions.:6 In 1991, the top 10 DRGs overall were: normal newborn (vaginal delivery), heart failure, psychoses, cesarean section, neonate with significant problems, angina pectoris, specific cerebrovascular disorders, pneumonia, and hip/knee replacement. These DRGs comprised nearly 30 percent of all hospital discharges. In terms of geographic variation, as of 2011 hospital payments varied across 441 labor markets. The system was created in the early 1970s by Robert Barclay Fetter and John D. Thompson at Yale University with the material support of the former Health Care Financing Administration (HCFA), now called the Centers for Medicare & Medicaid Services (CMS). DRGs were first implemented in New Jersey, beginning in 1980 at the initiative of NJ Health Commissioner Joanne Finley:13 with a small number of hospitals partitioned into three groups according to their budget positions — surplus, breakeven, and deficit — prior to the imposition of DRG payment. The New Jersey experiment continued for three years, with additional cadres of hospitals being added to the number of institutions each year until all hospitals in New Jersey were dealing with this prospective payment system. DRGs were designed to be homogeneous units of hospital activity to which binding prices could be attached. A central theme in the advocacy of DRGs was that this reimbursement system would, by constraining the hospitals, oblige their administrators to alter the behavior of the physicians and surgeons comprising their medical staffs. Hospitals were forced to leave the 'nearly risk-free world of cost reimbursement' and face the uncertain financial consequences associated with the provision of health care. DRGs were designed to provide practice pattern information that administrators could use to influence individual physician behavior. DRGs were intended to describe all types of patients in an acute hospital setting. DRGs encompassed elderly patients as well as newborn, pediatric and adult populations.