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Classification system for the billing procedure in hospitals

Diagnosis related group (DRG) is a system to classify hospital cases into one of originally 467 groups, with the last group (coded as 470 through v24, 999 thereafter) being "Ungroupable". This system of classification was developed as a collaborative project by Robert B Fetter, PhD, of the Yale School of Management, and John D. Thompson, MPH, of the Yale School of Public Health. The system is also referred to as "the DRGs", and its intent was to identify the "products" that a hospital provides. One example of a "product" is an appendectomy. The system was developed in anticipation of convincing Congress to use it for reimbursement, to replace "cost based" reimbursement that had been used up to that point. DRGs are assigned by a "grouper" program based on ICD (International Classification of Diseases) diagnoses, procedures, age, sex, discharge status, and the presence of complications or comorbidities. DRGs have been used in the US since 1982 to determine how much Medicare pays the hospital for each "product", since patients within each category are clinically similar and are expected to use the same level of hospital resources. DRGs may be further grouped into Major Diagnostic Categories (MDCs). DRGs are also standard practice for establishing reimbursements for other Medicare related reimbursements such as to home healthcare providers.

The CMS DRGs designate approximately 3,000 diagnosis codes as substantial comorbid conditions or complications (CCs). These diagnoses cover a broad
spectrum of disease conditions, ranging from major acute illnesses (e. g., heart attack and stroke) to minor illnesses (e. g., otitis media and urinary tract infections). The CMS SDRGs improved upon the original DRG definitions by dividing all diagnoses into three categories: not a CC, a CC, or a Major CC. When compared to CCs, treatment of patients with Major CCs required a substantial amount of additional resources.

As of 2003, the top 10 DRGs accounted for almost 30% of acute hospital admissions. In 1991, the top 10 DRGs overall were: normal newborn (vaginal delivery), heart failure, psychoses, Caesarean section, neonate with significant problems, angina pectoris, specific cerebrovascular disorders, pneumonia, and hip/knee replacement. These DRGs comprised nearly 30 percent of all hospital discharges. In terms of geographic variation, as of 2011 hospital payments varied across 441 labor markets.

The system was created in the early 1970s by Robert Barclay Fetter and John D. Thompson at Yale University with the material support of the former Health Care Financing Administration (HCFA), now called the Centers for Medicare & Medicaid Services (CMS). DRGs were first implemented in New Jersey, beginning in 1980 at the initiative of NJ Health Commissioner Joanne Finley The New Jersey experiment continued for three years, with additional cadres of hospitals being added to the number of institutions each year until all hospitals in New Jersey were dealing with this prospective payment system. and face the uncertain financial consequences associated with the provision of health care. DRGs were designed to provide practice pattern information that administrators could use to influence individual physician behaviour. The prospective payment system implemented as DRGs had been designed to limit the share of hospital revenues derived from the Medicare program budget.

NameVersionStart dateNotesMS DRG25October 1, 2007Group numbers resequenced, so that for instance "Ungroupable" is no longer 470 but is now 999. To differentiate it, the newly resequenced DRG are now known as MS DRG. Before the introduction of version 25, many CMS DRG classifications were "paired" to reflect the presence of complications or comorbidities (CCs). A significant refinement of version 25 was to replace this pairing, in many instances, with a trifurcated design that created a tiered system of the absence of CCs, the presence of CCs, and a higher level of presence of Major CCs. As a result of this change, the historical list of diagnoses that qualified for membership on the CC list was substantially redefined and replaced with a new standard CC list and a new Major CC list. Another planning refinement was not to number the DRGs in strict numerical sequence as compared with the prior versions. In the past, newly created DRG classifications would be added to the end of the list. In version 25, there are gaps within the numbering system that will allow modifications over time, and also allow for new MS DRGs in the same body system to be located more closely together in the numerical sequence. MS DRG26October 1, 2008One main change: implementation of Hospital Acquired Conditions (HAC). Certain conditions are no longer considered complications if they were not present on admission (POA), which will cause reduced reimbursement from Medicare for conditions apparently caused by the hospital. MS DRG27October 1, 2009Changes involved are mainly related to Influenza A virus subtype H1N1. MS DRG31October 1, 2013MS DRG32October 1, 2014MS DRG33October 1, 2015Convert from ICD 9 CM to ICD 10 CM. MS DRG34October 1, 2016Address ICD 10 replication issues introduced in Grouper 33. As of March 2017 NTIS. gov no longer lists MS DRG software, and Grouper 34 can now be directly downloaded from CMS. Version 34 was revised twice to address replication issues, making the final release for fiscal year 2017 version 34 R3. MS DRG35October 1, 2017MS DRGs 984 through 986 deleted and reassigned to 987 through 989. Diagnosis codes relating to swallowing eye drops moved from DRGs 124 125 (Other Disorders of the Eye) to 917 918 (Poisoning and Toxic Effects of Drugs). Grouper 34 issue addressed relating to the 7th character of prosthetic/implant diagnosis codes in the T85.8 series indicating "initial encounter", "subsequent encounter" and "sequel". Numerous other changes. ".

DRGs and similar systems have expanded internationally; for example, in Europe some countries imported the scheme from US or Australia, and in other cases they were developed independently. In England, a similar set of codes exist called Health Resource Groups. As of 2018, Asian countries such as South Korea, Japan, and Thailand have limited adoption of DRGs. Latin American countries use a DRG system adapted to regionally extended medical classifications and nomenclatures. This DRG system is called AVEDIAN DRG GROUPER (LAT GRC).