N. Edwards et al., REFINEMENT OF THE MEDICARE DIAGNOSIS-RELATED GROUPS TO INCORPORATE A MEASURE OF SEVERITY, Health care financing review, 16(2), 1994, pp. 45-64
This article presents a system under consideration by the Health Care
Financing Administration (HCFA) for incorporating a measure of severit
y of illness into the Medicare diagnosis-related groups (DRGs). DRG as
signment is one of the main factors in determining the payment made fo
r hospital inpatient services furnished to Medicare beneficiaries. Spe
cifically, the formula used to calculate payment for a single Medicare
hospital inpatient case takes an average payment rate for a typical c
ase and multiplies it by the relative weight of the DRG to which it is
assigned. Thus, it is easy to see that the DRG relative weights have
a large impact on the payment a hospital receives. In this article, we
describe the Medicare DRG prospective payment system (PPS), evaluate
the various classification elements available for assessing severity o
f illness, describe the analyses used in formulating this proposal, an
d present the proposed DRG severity system.