Section 1886(d) of the Act specifies that the Secretary shall establish
a classification system (referred to as DRGs) for inpatient discharges
and adjust payments under the IPPS based on appropriate weighting factors
assigned to each DRG. Therefore, under the IPPS, we pay for inpatient
hospital services on a rate per discharge basis that varies according
to the DRG to which a beneficiary's stay is assigned. The formula used
to calculate payment for a specific case multiplies an individual hospital's
payment rate per case by the weight of the DRG to which the case is assigned.
Each DRG weight represents the average resources required to care for
cases in that particular DRG, relative to the average resources used to
treat cases in all DRGs.
Congress recognized that it would be necessary to recalculate the DRG relative
weights periodically to account for changes in resource consumption. Accordingly,
section 1886(d)(4)(C) of the Act requires that the Secretary adjust the
DRG classifications and relative weights at least annually. These adjustments
are made to reflect changes in treatment patterns, technology, and any
other factors that may change the relative use of hospital resources.
Currently, cases are classified into Medicare Severity Diagnosis Related
Groups (MS-DRGs) for payment under the IPPS based on the following information
reported by the hospital: the principal diagnosis, up to 25 additional
diagnoses, and up to 25 procedures performed during the stay. In a small
number of MS-DRGs, classification is also based on the age, sex, and discharge
status of the patient. Effective October 1, 2015, the diagnosis and procedure
information is reported by the hospital using codes from the International
Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM)
and the International Classification of Diseases, Tenth Revision, Procedure
Coding System (ICD-10-PCS).
For additional information on the MS-DRG system, including yearly reviews
and changes to the MS-DRGs, please view prior Inpatient Prospective Payment
System (IPPS) proposed and final rules located in the left navigational
area of this page.
Requests for annual MS-DRG classification changes and any MS-DRG related
inquiries should be sent to the MSDRGClassificationChange@cms.hhs.gov mailbox.
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