An evaluation of diagnosis-related group severity and complexity refinement

In 1988, an ambitious and extensive project was undertaken in New Jersey to evaluate severity class adjustment of the all-payer prospective payment system. Another project objective was to evaluate alternative strategies for refining diagnosis-related groups (DRGs). The evaluation presented here includes a comparison of DRG refinement using Computerized Severity Index classes and Yale University complexity classes. Statistical methods and payment simulations are used to assess the impact of DRG refinement and consequent revenue changes. When a high volume subset of DRGs is refined, simulated payment shifts between hospitals on the order of 5 percent of total hospital costs are indicated by this analysis.