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C.

SECONDARY DIAGNOSES, PROCEDURES, DRG CREEP

It was found in the old DRGS, that the order of secondary diagnoses or procedures could change DRG assignment and affect hospital reimbursement.

The term "DRG Creep" was coined to describe deliberate and systematic ordering of secondary diagnoses or procedures to obtain the highest reimbursement. In some instances, rearrangement of principal diagnosis was also attempted. DRG Creep was

a problem with the old 383 DRGs because the computer could use only principal diagnosis, first listed secondary diagnosis, and principal procedure (very rarely were secondary procedures used). Therefore, hospitals could order the codes for maximum reimbursement.

New Jersey instituted strict definitions. First and most important, principal diagnosis was defined as the reason, after study, that the patient was admitted. In accordance with the Uniform Hospital Discharge Data Set definitions, additional diagnoses were to be coded only if they had bearing on the treatment or length of stay. There was a four part definition of principal procedure.

The view of New Jersey was that if a hospital did indeed treat a patient for a severe secondary or perform multiple severe procedures, then the reimbursement should be reflective of this resource consumption. However, the necessity for treatment must be documented in the medical record, and those procedures performed must also be documented.

So, not only did the State of New Jersey institute strict definitions of what diagnoses and procedures could be coded for DRG assignment, it also mandated that documentation for everything be present in the medical record.

DRG Creep is not a problem with the 467 DRGs. The computer program selects the secondary diagnosis codes or procedure codes needed for DRG assignment. The ordering of the codes does not matter because GROUPER searches all codes listed in the record. This computer program is "smarter" than the old program. Significant secondary diagnoses and procedures which affect resource consumption will be taken into account when the payment rates are calculated.

DATA REQUIREMENTS

The data requirements for the DRG patient classification system are massive. The proposed Medicare Prospective Payment System (PPS) may not have the same sheer volume of data (abstracts, bills,

cost reports and Uniform Bill-Patient Summary) but the principles will still apply.

Hospitals must have computer capabilities. The 467 DRGS cannot routinely be assigned by hand. There must be the capability for all pieces of a patient's record to flow to a central point for DRG assignment. (See Attachment B). Collection of the pieces and DRG assignment must be done as rapidly and efficiently as possible. must be the capability to verify and correct records. There must be the clincial or financial management information. Above all, the hospital and its billing and medical abstract vendors must understand

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how to work with the DRG system.

Hospitals are not the only agencies which need to have

computer capabilities.

The volume of data received necessitates

computer capability at the intermediary and payer level. They must have the ability to collect, verify and correct data submissions. They must be able to check DRG assignment and dollars charged. They must have edit and submission checks to obtain accurate data on a timely basis. Data requirements and timeliness for data submission should be worked out ahead of time and then

enforced.

IMPLEMENTATION

During 1978 and 1979, while in a developmental mode, New Jersey established experimental rates for approximately 20 hospitals. The rates were based upon available data sets and various methods of calculation were utilized. This experiment allowed refinement of both the data sets and the methodology as a result of the hospital's experience with the experimental rates.

Even though New Jersey had a two year simulation, implementation brought additional problems which were not fully anticipated. Examples of these problems were data management (at all levels) and concern about quality medical care.

A. DATA MANAGEMENT

The logistics of data management and reporting presented an enormous challenge. There have been refinements made each year and

continued simplification. Despite these refinements, one of New Jersey's main problems remains the sheer volume of data and the errors involved in manipulation of a massive data base (1.2 million hospital inpatients per year). Data quality, timeliness of submissions, correction turn-around time, and programming have all presented problems. These problems were uncovered in 1980 when New Jersey implemented the DRG system for 26 hospitals, two intermediaries, and 380 thousand patients. It is conceivable

that Medicare may experience some difficulties implementing a system for 6,000 hospitals, 100 intermediaries and 10 million patients. The disruptions and changes caused by the discovery and correction of problems were minimized in New Jersey by phasing-in the system with only 26 hospitals rather than all 100 acute care hospitals.

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Since the DRG system provides incentives for hospitals to reduce LOS, there was concern expressed that quality of care would suffer (e.g. patients discharged too early). Likewise, since there is an incentive for hospitals to decrease unnecessary resource consumption, the question of decreasing quality by utilizing fewer tests or other resources was raised by some critics of the DRG system. The Professional Standard Review Organizations (PSROS) have become the focal point for addressing quality of care issues. New Jersey has found no evidence that quality of care has diminished under the DRG system.

While great care can be taken to anticipate and resolve

problems prior to implementation, additional problems will be
discovered when the system is actually in place and functioning.
It was for this reason that New Jersey phased-in hospitals
over several years. A phase-in of the system affords the
opportunity to correct problems with fewer repercussions.

OTHER ISSUES

A. EDUCATION

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There are several other issues that should be raised. The first is the tremendous importance of education for hospitals, physicians, patients, intermediaries, PSROS, and planning agencies. Hospitals must learn to use DRGs to manage clinically, operationally and financially in the most efficient manner. The importance and dire necessity of thorough education of a hospital's medical staff cannot be over-emphasized. Physicians must understand their role in hospital resource consumption. Patients must understand the classification and billing. Intermediaries must understand DRG assignment and claim check. PSROS must understand their role in assuring quality data and quality care under DRGs. Planning agencies must be able to use DRGs as tools to make their planning decisions.

If the entire hospital is not involved in the DRG system,

then the hospital cannot effectively function under DRGs. Attachment C lists areas of management consideration for a hospital going onto

DRGS.

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