What does DRG stand for and how is it important in medical billing?

DRG stands for Diagnosis Related Group. Medicare and various other insurance companies have established DRGs  as the foundation of the hospital reimbursement system. The reimbursement of the claim is based on the case mix  complexity. In simpler terms, the DRG reimbursement system works on the basis of prognosis & diagnosis instead  of the cost spent by the hospital or clinic.  

What does case mix complexity mean? 

Let’s first understand what factors are taken into account in DRG determination:

1. Illness severity: Illness severity refers to the severity of loss of functioning and mortality of the patient due to  the disease. 
2. Prognosis: Prognosis refers to the probable future condition of the patient i.e. if the patient’s condition will be  improving or deteriorating, the probability of illness recurrence, and probable life span of the patient. 
3. Difficulty in treatment: Several circumstances which are taken into account comprise the difficulty of treatment: If the  illness symptoms in the patient do not have a clear pattern and/or the treatment requires complicated and  sophisticated procedures and/or close monitoring and supervision is required in the treatment.
4. Required interventions: The term refers to the need for constant and/or immediate care required by the  patient, which, when done otherwise, can cause severe consequences in the patient’s health.  
5. Resource intensity: The term refers to the number of hospital resources (diagnostic, therapeutic, and bed  services) which are required by the patient. 

Case mix complexity is a term that encompasses all the above factors involved in determining the DRG. However, in  various cases, there is a gap between the definition of case mix complexity understood by medical professionals &  the definition stated by DRG administrators & regulators. 

A considerable number of medical professionals understand case mix complexity as something that takes into account the condition of the patients as well as the treatment difficulty associated with providing care. This includes severity of illness, treatment difficulty, negative prognosis, and the amount of need for required intervention. 

On the other hand, as per the DRG administrators & regulators, case mix complexity is defined as the required number of resources used by  the patients. It may be that severe is the illness, more will be the resource intensity demanded. However, this is not  always the case. For instance: A patient suffering from terminal cancer has greater illness severity and poor  prognosis. However, such patients require fewer hospital resources (mostly basic nursing care). 

Therefore, DRG can be described as the relationship between case mix complexity, resource demands, and cost  incurred by the hospital for the treatment. To simplify the determination of DRG, patients are grouped based on  demographic, diagnostic & therapeutic attributes. 

How is DRG determined? 

1. Principal Diagnosis: The principal diagnosis is the patient’s medical condition, based on which they are  admitted. In such cases, when the illness is identified after patient admission, it can be termed as a  principal diagnosis as the illness was present before the patient’s admission. For instance: if a patient is  admitted because of abdominal pain, and tests declare colon cancer, “colon cancer” will be the principal  diagnosis.  
2. Surgery: DRG is greatly impacted by the surgical requirement for the patient. The principal diagnosis of a  patient is a part of the major diagnostic category. A DRG will be different when surgery and principal  diagnosis fall in the same major diagnostic category than when both of them fall in the different major  diagnostic category. 
3. Comorbidity: A comorbid condition is an illness stated in principal diagnosis. Such conditions are prone to  complications in the treatment procedure, such as heart failure, sepsis, an acute flare-up of chronic COPS.  These complications can be bifurcated into two categories: major & minor comorbid conditions. To  simplify DRG determination in such cases, DRG triplet has been established:
   1. Lower paying DRG: Principal diagnosis with no comorbid complication falls under lower paying  DRG. 
   2. Medium paying DRG: Principal diagnosis with minor comorbid complication falls under medium paying DRG. It is also referred to as DRG with CC (Comorbid Condition). 
   3. Higher paying DRG: Principal diagnosis with minor comorbid complication falls under higher  paying DRG. It is also referred to as DRG with MCC (Major Comorbid Condition). 

What is the importance of DRG in medical billing? 

Determination of DRG directly impacts the revenue cycle. As mentioned before, Medicare and various other  insurance companies use DRG to reimburse the insurance claim. If the insurance claim is lower than the  predetermined DRG of a specific condition, the medical professional profits from the treatment. On the other  hand, if the insurance claim is higher than the DRG, the medical professional will have to incur a loss for the same  treatment. Hence, accurate documentation is highly necessary to determine the DRG and avoid any unprofitable  situations. 

Managing the intricacies in DRG determination can be onerous to a medical professional. In such a situation, it is  always a good idea to outsource medical billing services from renowned companies like Capline services whose  team of experts accurately manage the complete process and makes the revenue system more efficient and profitable.