DRGs and ICD-10 Testing

by Paresh Shah, MindLeaf Technologies, Inc.

Paresh Shah, MindLeaf Technologies, Inc.As we approach Oct. 1, 2014 – the ICD-10 compliance deadline – we need to know now how the specificity in coding translations will have an impact on the DRGs. CMS has indicated that the DRG payment calculation under ICD-10 will be almost similar to the current ICD-9 system – i.e. revenue neutral. The CMS findings show that 99% of the cases did not show changes in DRGs (when comparing ICD-9 to ICD-10). These being the statistics, is your hospital on the 99% (no changes in DRG revenue amount) or the 1% (changes in the DRG revenue amount) of the normal curve?  The best way to know – and prepare – is to conduct DRG testing within your own organization.

The DRG testing plan should start from the assessment phase. As hospitals prepare for ICD-10 testing, the revenue implications can be minor to major based on the testing scenarios used and implemented at their institutions.

The DRGs are calculated by each hospital in different ways:

  • Coding the medical record in ICD-9 and ICD-10 and then compare the result.
  • Estimate the total claims data by translating ICD-9 to ICD-10 codes and then calculate the DRG.
  • Use permutation technique – all ICD-10 codes that translate to ICD-9 then group each option.

Depending on how the DRGs are calculated, the DRG testing is divided into provider specialty or the maximum/minimum payment variances:

      1. There are medical records/cases where there is no permutation feasible – where the codes can return the claim to initial ICD-9 DRG. For these claims, the testing involves:

-Prepare V5010 claims –> submit claims –> payer adjudicates –> receive payment. The amount of time allocated for testing should be minimal.      

      2. There are other medical records/claims where the DRG shifts occur. Based on the case mix, the cases/medical records can be grouped into clusters (low to high impact or underpayment to overpayment). For each cluster, the following needs to be tested:

  • Evaluating the EMRs structured documents/template and the method used at your hospital.
  • Physician’s clinical documentation (amount of training provided; amount of training needed).
  • Medical coding (ability for the coders to code in ICD-10). This is an iterative process, and needs to be tested repeatedly until the appropriate DRG mix is matched (to the expected value) or if there is a shift.

      3. You may have a case mix/medical record where the DRG shift occurs after the claim is submitted to the payers. This scenario occurs when the payers take the ICD-10 claim and then use mapping to their ICD-9 coding system. Based on the results, the payers contract needs to be revisited.

All of the above DRG testing scenarios can be explained in detail, but the summary amongst all the DRG testing is as follows:

  • The goal of the DRG testing is not to validate the claims but to focus on the allowed amount, i.e comparison between ICD-9 and ICD-10 claims.
  • Testing time is going to be higher if there is a DRG shift
  • Availability of the resources (physicians, coders, revenue cycle, IT) may be scarce as they have to perform their daily jobs (e.g – physicians)

Whenever a DRG shifts occurs, there is a probability that an internal audit will be performed on the DRG shift, internal assessment and the recommended outcome. An audit trail is an important element in the DRG testing.

In conclusion, the ICD-10 test plan(s) should be thorough and complete as to hours allocated, resources, time length and should include all the test scenarios. If your planning is thorough and complete, it will take less time to test DRGs and the hospital will be able to meet the compliance deadline. In the end, your goal should be to say with 100% confidence that you belong to the 99% of the test cases (revenue neutral) and if you do belong to the 1%, you have documentation and tests results to support your findings.

Paresh Shah founded MindLeaf Technologies, Inc as a Medical Compliance & Medical Administration Services Company. It achieved INC 500/5000 from 2007-2012 as a fastest growing company in the US and Boston Business Journal Pacesetters Award from 2009-2011. Prior to founding MindLeaf, Mr. Shah worked for Digital Equipment Cor.p and GTE Government Systems in various software implementation/consulting roles. Mr. Shah has a Bachelors from Northeastern University, Masters from Boston University and an MBA from Babson College. Mr. Shah is a member of HIMSS ICD-10 Task Force, and a co-chair of HIMSS ICD-10 Playbook Content Review Work Group.