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Evaluation of Severity-Adjusted DRG Systems

Interim Report

by Barbara O. Wynn, Megan K. Beckett, Lee H. Hilborne, Molly M. Scott, Benjamin Bahney

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The Centers for Medicare and Medicaid Services (CMS), the federal agency responsible for administering the Medicare program, is considering major refinements in the methodologies used to account for differences in patient mix in its prospective payment system (PPS) for acute-care inpatient hospital services. CMS asked the RAND Corporation to evaluate alternative systems that might be used by the PPS to classify discharges into severity-adjusted diagnosis-related groups. This interim report presents the preliminary results of analyses that address three questions: (1) How well does each classification system explain variation in resource usage? (2) How would the classification system affect a hospital’s patient mix? (3) Are the groupings manageable, administratively feasible, and understandable?

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Overview of DRG Classification Systems

  • Chapter Three

    Comparative Performance of DRG Systems in Explaining Cost Variation

  • Chapter Four

    Differences in DRG Grouping Logic

  • Chapter Five

    Changes in Relative Weights and Case Mix

  • Chapter Six

    Other Issues, Summary of Findings, and Discussion

The research described in this report was prepared For the Centers for Medicare and Medicaid Services and performed under the auspices of RAND Health.

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