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August 19, 1992, Vol 268, No. 7 >
ARTICLE | August 19, 1992

Medicare Reimbursement Accuracy Under the Prospective Payment System, 1985 to 1988 FREE

David C. Hsia, JD, MD, MPH; Cathaleen A. Ahern; Brian P. Ritchie; Linda M. Moscoe; W. Mark Krushat, MPH, ScD
[+] Author Affiliations

The views expressed in this article do not represent the policies of any US government agency.

Reprint requests to OM 1-D-16, Office of Inspector General, US Department of Health and Human Services, 6340 Security Blvd, Baltimore, MD 21207 (Dr Hsia).


JAMA. 1992;268(7):896-899. doi:10.1001/jama.1992.03490070078046
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References

Background.  —Hospital reimbursement by Medicare's prospective payment system depends on accurate identification and coding of inpatients' diagnoses and procedures using the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). A previous study showed that 20.8%±0.5% (mean±SE) of hospital bills for 1985 contained errors that changed their diagnosis related group (DRG) and that a significant 61.6%±1.3% of errors overreimbursed the hospitals. This DRG "creep" improperly increased net reimbursement by 1.9%, $308 million when projected nationally. The present study updated our previous study with 1988 data.

Methods.  —The Office of Inspector General, US Department of Health and Human Services, obtained a simple random sample of 2451 hospital charts for Medicare discharges from 1988. The American Medical Record Association reabstracted the ICD-9-CM codes on a blinded basis, grouped them to DRGs, and determined the reasons for discrepancies.

Results.  —Coding errors declined to 14.7%±0.7% in 1988, and a nonsignificant 50.7%±2.6% of DRG errors overreimbursed the hospitals. Projected nationally, hospitals did not receive a significant overreimbursement. Physician misspecification of the narrative diagnoses underreimbursed the hospitals, while billing department resequencing overreimbursed them.

Conclusions.  —The attestation requirement may have deterred DRG creep due to attending physician upcoding, but the peer review organizations' sentinel effect and educational activities have not eliminated hospital resequencing.(JAMA. 1992;268:896-899)

REFERENCES

1 +
 Health Care Financing Administration, US Dept of Health and Human Services. Medicare program: prospective payments for Medicare inpatient hospital services. Federal Register . (September 1) , 1983;; 48:39752-39890.
2 +
Health Care Financing Administration, US Dept of Health and Human Services. Medical review requirements: DRG validation. 42 CFR §412.46 (a).
3 +
Health Care Financing Administration, US Dept of Health and Human Services. Medical review requirements: DRG validation. 42 CFR §412.46(c).
4 +
International Classification of Diseases, Ninth Revision: Clinical Modification . 2nd ed. Washington, DC: National Center for Health Statistics, Public Health Service, US Dept of Health and Human Services; 1980;. US Dept of Health and Human Services publication PHS 80-1260.
5 +
Hodges JT, Quinn MJ.  Defining medical record and finance department relationships. Health Care Financial Manage . (July) 1985;;39:70-74.
6 +
Young WW.  ICD-9-CM coding and coding practice changes for case mix management. JAm Med Records Assoc . (March) 1986;;57:29-33.
7 +
Hsia DC, Krushat WM, Fagan AB, Tebbutt JA, Kusserow RP.  Accuracy of diagnostic coding for Medicare patients under the prospective payment system. N Engl J Med . 1988;;318:352-355.
8 +
Bogdanich W. The Great White Lie . New York, NY: Simon & Schuster Inc; 1991;:129-139.
9 +
Simborg DW.  DRG creep: a new hospital-acquired disease. N Engl J Med . 1981;;304:1602-1604.
10 +
Carter GM, Newhouse JP, Relies DA.  How much change in the case-mix index is DRG creep? J Health Econ . 1990;;9:411-428.
11 +
Maklan CW, Raskin IE, Siegel RA. Medical Treatment Effectiveness Program (MEDTEP) Active Research Projects as of September 30, 1990 . Rockville, Md: Agency for Health Care Policy and Research; 1991;. Publication OM-91-0517. Program note.
12 +
Hexter AC, Harris JA, Roeper P, Croen LA, Krueger P, Gant D.  Evaluation of the hospital discharge diagnoses index and the birth certificate as sources of information on birth defects. Public Health Rep . 1990;;105:296-307.
13 +
Stone DA, Hsia DC, Meyers M, et al. DRG 416: Septicemia . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1989;. Publication OAI-12-88-01180.
14 +
Kleinbaum DG, Kupper LL, Morgenstern H. Epidemiological Research: Principles and Quantitative Methods . Belmont, Calif: Lifetime Learning Publications; 1982;:221-241.
15 +
Division of Information Analysis, Office of Statistics and Data Management, Bureau of Data Management and Strategy, Health Care Financing Administration, US Dept of Health and Human Services. 1989 HCFA Statistics . Baltimore, Md: Bureau of Data Management and Strategy, Health Care Financing Administration; 1989;:16,34. Health Care Financing Administration publication 03294.
16 +
Knight JW, Hsia DC, eds. National DRG Validation Study Update: Summary Report . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1992;. Publication OEI-12-90-00190.
17 +
Knight JW, Hsia DC, eds. National DRG Validation Study: Technical Report . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1992;. Publication OEI-12-90-00191.
18 +
Cohen J.  A coefficient of agreement for nominal scales. Educ Psychol Meas . 1960;;20:37-46.
19 +
Glantz SA. Primer of Biostatistics . New York, NY: McGraw-Hill International Book Co; 1981;:172.
20 +
US Health Care Financing Administration.  Medicare—persons served and reimbursements: 1980 to 1988.  In: King GW, ed. Statistical Abstract ofthe United States, 1991 . 111th ed. Washington, DC: US Government Printing Office; 1991;:6.
21 +
Delaney AM, Hsia DC, eds. 1985 National DRG Validation Study . Lexington, Mass: Health Data Institute; 1987;.
22 +
Demlo LK, Brown SS, Campbell PM. Reliability of Hospital Discharge Abstracts . Washington, DC: Institute of Medicine; 1977;.
23 +
Campbell PM, Demlo LK, Sparkman DM, Surdi JH. Reliability of National Hospital Discharge Survey Data . Washington, DC: Institute of Medicine; 1980;.
24 +
Fox LA, Tucker J.  Product management spurs emphasis on medical records. Hospitals . (March 1) , 1985;;59:92-94.
25 +
Health Standards and Quality Bureau, US Health Care Financing Administration. Background and Future Direction of the PRO Program—Preamble to the Scope of Work for the Fourth PRO Contracting Cycle . Baltimore, Md: US Health Care Financing Administration; 1991;:6.
26 +
Carter GM, Ginsburg PB. The Medicare Case-Mix Index Increase: Medical Practice Changes, Aging, and DRG Creep . Santa Monica, Calif: RAND Corporation; 1985;. Publication R-3292-HCFA.
27 +
Stone DA, Kleiman MAR, Welborn R, Schutte J, Cavanagh DP, Hsia DC. FY1985 National DRG Validation Study: Peer Review Organization Coding Accuracy . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1990;. Publication OEI-12-09-00660.
28 +
Hsia DC.  Diagnosis related group coding accuracy of the peer review organizations. J Am Health Information Manage Assoc . In press.
29 +
Kusserow RP, Steeley BL.  DRG creep: pitfalls and sanctions to avoid. Consultant . 1989;;29:93-95.
30 +
Health Care Financing Administration, US Dept of Health and Human Services. Peer review organizations. 42 CFR §473.15: 294.
31 +
Prospective Payment Assessment Commission. Report and Recommendations to Congress: March 1,1991 . Washington, DC: Prospective Payment Assessment Commission; 1991;:20, 63.
32 +
Spiegal AD, Kavaler F. Cost Containment and DRGs . Owings Mills, Md: National Health Publications; 1986;:36.

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1 +
 Health Care Financing Administration, US Dept of Health and Human Services. Medicare program: prospective payments for Medicare inpatient hospital services. Federal Register . (September 1) , 1983;; 48:39752-39890.
2 +
Health Care Financing Administration, US Dept of Health and Human Services. Medical review requirements: DRG validation. 42 CFR §412.46 (a).
3 +
Health Care Financing Administration, US Dept of Health and Human Services. Medical review requirements: DRG validation. 42 CFR §412.46(c).
4 +
International Classification of Diseases, Ninth Revision: Clinical Modification . 2nd ed. Washington, DC: National Center for Health Statistics, Public Health Service, US Dept of Health and Human Services; 1980;. US Dept of Health and Human Services publication PHS 80-1260.
5 +
Hodges JT, Quinn MJ.  Defining medical record and finance department relationships. Health Care Financial Manage . (July) 1985;;39:70-74.
6 +
Young WW.  ICD-9-CM coding and coding practice changes for case mix management. JAm Med Records Assoc . (March) 1986;;57:29-33.
7 +
Hsia DC, Krushat WM, Fagan AB, Tebbutt JA, Kusserow RP.  Accuracy of diagnostic coding for Medicare patients under the prospective payment system. N Engl J Med . 1988;;318:352-355.
8 +
Bogdanich W. The Great White Lie . New York, NY: Simon & Schuster Inc; 1991;:129-139.
9 +
Simborg DW.  DRG creep: a new hospital-acquired disease. N Engl J Med . 1981;;304:1602-1604.
10 +
Carter GM, Newhouse JP, Relies DA.  How much change in the case-mix index is DRG creep? J Health Econ . 1990;;9:411-428.
11 +
Maklan CW, Raskin IE, Siegel RA. Medical Treatment Effectiveness Program (MEDTEP) Active Research Projects as of September 30, 1990 . Rockville, Md: Agency for Health Care Policy and Research; 1991;. Publication OM-91-0517. Program note.
12 +
Hexter AC, Harris JA, Roeper P, Croen LA, Krueger P, Gant D.  Evaluation of the hospital discharge diagnoses index and the birth certificate as sources of information on birth defects. Public Health Rep . 1990;;105:296-307.
13 +
Stone DA, Hsia DC, Meyers M, et al. DRG 416: Septicemia . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1989;. Publication OAI-12-88-01180.
14 +
Kleinbaum DG, Kupper LL, Morgenstern H. Epidemiological Research: Principles and Quantitative Methods . Belmont, Calif: Lifetime Learning Publications; 1982;:221-241.
15 +
Division of Information Analysis, Office of Statistics and Data Management, Bureau of Data Management and Strategy, Health Care Financing Administration, US Dept of Health and Human Services. 1989 HCFA Statistics . Baltimore, Md: Bureau of Data Management and Strategy, Health Care Financing Administration; 1989;:16,34. Health Care Financing Administration publication 03294.
16 +
Knight JW, Hsia DC, eds. National DRG Validation Study Update: Summary Report . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1992;. Publication OEI-12-90-00190.
17 +
Knight JW, Hsia DC, eds. National DRG Validation Study: Technical Report . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1992;. Publication OEI-12-90-00191.
18 +
Cohen J.  A coefficient of agreement for nominal scales. Educ Psychol Meas . 1960;;20:37-46.
19 +
Glantz SA. Primer of Biostatistics . New York, NY: McGraw-Hill International Book Co; 1981;:172.
20 +
US Health Care Financing Administration.  Medicare—persons served and reimbursements: 1980 to 1988.  In: King GW, ed. Statistical Abstract ofthe United States, 1991 . 111th ed. Washington, DC: US Government Printing Office; 1991;:6.
21 +
Delaney AM, Hsia DC, eds. 1985 National DRG Validation Study . Lexington, Mass: Health Data Institute; 1987;.
22 +
Demlo LK, Brown SS, Campbell PM. Reliability of Hospital Discharge Abstracts . Washington, DC: Institute of Medicine; 1977;.
23 +
Campbell PM, Demlo LK, Sparkman DM, Surdi JH. Reliability of National Hospital Discharge Survey Data . Washington, DC: Institute of Medicine; 1980;.
24 +
Fox LA, Tucker J.  Product management spurs emphasis on medical records. Hospitals . (March 1) , 1985;;59:92-94.
25 +
Health Standards and Quality Bureau, US Health Care Financing Administration. Background and Future Direction of the PRO Program—Preamble to the Scope of Work for the Fourth PRO Contracting Cycle . Baltimore, Md: US Health Care Financing Administration; 1991;:6.
26 +
Carter GM, Ginsburg PB. The Medicare Case-Mix Index Increase: Medical Practice Changes, Aging, and DRG Creep . Santa Monica, Calif: RAND Corporation; 1985;. Publication R-3292-HCFA.
27 +
Stone DA, Kleiman MAR, Welborn R, Schutte J, Cavanagh DP, Hsia DC. FY1985 National DRG Validation Study: Peer Review Organization Coding Accuracy . Washington, DC: Office of Inspector General, US Dept of Health and Human Services; 1990;. Publication OEI-12-09-00660.
28 +
Hsia DC.  Diagnosis related group coding accuracy of the peer review organizations. J Am Health Information Manage Assoc . In press.
29 +
Kusserow RP, Steeley BL.  DRG creep: pitfalls and sanctions to avoid. Consultant . 1989;;29:93-95.
30 +
Health Care Financing Administration, US Dept of Health and Human Services. Peer review organizations. 42 CFR §473.15: 294.
31 +
Prospective Payment Assessment Commission. Report and Recommendations to Congress: March 1,1991 . Washington, DC: Prospective Payment Assessment Commission; 1991;:20, 63.
32 +
Spiegal AD, Kavaler F. Cost Containment and DRGs . Owings Mills, Md: National Health Publications; 1986;:36.

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