Evaluation of Severity-Adjusted DRG Systems

Addendum to the Interim Report

Barbara O. Wynn, Molly M. Scott

Published Jul 29, 2007

The Centers for Medicare & Medicaid Services (CMS) asked RAND to evaluate five “off-the-shelf” severity-adjusted DRG systems that might be considered for Medicare’s inpatient prospective payment system (PPS). RAND released an interim report evaluating the five systems as a working paper in March 2007(WR-434-CMS). Shortly thereafter, CMS proposed in the Fiscal Year 2008 (FY08) proposed rule to adopt a different system (Medicare-Severity or MS-DRGs. This addendum reports our findings with respect how the MS-DRGs compare to the other severity-adjusted systems. It addresses three questions:(1) How well does the MS-DRG 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?

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Wynn, Barbara O. and Molly M. Scott, Evaluation of Severity-Adjusted DRG Systems: Addendum to the Interim Report. Santa Monica, CA: RAND Corporation, 2007. https://www.rand.org/pubs/working_papers/WR434z1.html.
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