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In 1984, the Medicare program paid hospitals a higher amount per patient discharge than had been projected, because of a substantial shift in the mix of cases toward those with higher payment rates. This report examines what part of that change in measured case mix is due to medical practice changes, what part to a change in the resource needs of patients, and what part to changes in the coding of medical records in response to the incentives of a prospective payment system based on Diagnosis Related Groups (DRG). Two databases were used to investigate the causes of the Case Mix Index (CMI) increase: Medicare bills from calendar year 1981 and fiscal year 1984, and discharge abstract data from the Commission on Hospital and Professional Activities for January 1981 through September 1984. Medical practice changes account for only 2.1 percentage points of the 8.4 percent increase in the CMI; aging of the Medicare inpatient population explained none of the increase; and changes in documentation and coding account for the remaining 6.2 percentage point increase in the CMI, but further experience will determine whether the increase is a one-time adjustment to a new coding environment, or a phenomenon of continued inflation in the CMI due to aggressive coding practices.
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