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Modifying DRG-PPS to include only diagnoses present on admission: financial implications and challenges
Chunliu Zhan1, Anne Elixhauser, Bernard Friedman
1Agency for Healthcare Research and Quality, Department of Health and Human Services, Rockville, Maryland 20850, USA. Chunliu.zhan@ahrq.hhs.gov
Medical Care
|May 15, 2007
Summary
Implementing present on admission (POA) coding for Medicare payments could save $800 million annually. This change improves quality research and aligns with pay-for-performance initiatives by distinguishing hospital-acquired conditions from existing comorbidities.
Area of Science:
- Health Services Research
- Health Economics
- Medical Informatics
Background:
- Distinguishing hospital-acquired complications from present on admission (POA) conditions is crucial for quality and safety research using healthcare claims data.
- Pay-for-performance initiatives and legislation mandating reduced payments for hospital-acquired infections necessitate accurate POA coding.
Purpose of the Study:
- To assess the financial impact of Medicare paying solely based on POA diagnoses.
- To examine the challenges associated with implementing POA coding.
Main Methods:
- Medicare payments were calculated using the Diagnosis Related Group (DRG)-based Prospective Payment System (PPS) formula, comparing payments based on all diagnoses versus only POA diagnoses.
- Data from Medicare discharge abstracts in California and New York in 2003 were analyzed.
- Potential savings from excluding non-POA diagnoses were calculated, and POA coding patterns were explored.
Main Results:
- Medicare could have saved an estimated $800 million nationwide in 2003 if payments were based only on POA diagnoses.
- Approximately 15% of claims contained non-POA codes, but only 1.4% were reassigned to lower-cost DRGs after exclusion.
- Excluding non-POA diagnoses led to reduced operating cost payments but increased outlier payments, indicating potential coding issues.
Conclusions:
- Incorporating POA coding into the DRG-PPS framework offers substantial savings for Medicare.
- This integration aligns with pay-for-performance principles and enhances the utility of claims data for quality assurance.
- Addressing POA coding challenges is essential for successful implementation.
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