Apr 21, 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?