Using patient age in defining DRGs for Medicare payment

Major changes were recently implemented in the diagnosis related groups (DRGs) used for payment under Medicare's prospective payment system (PPS). As of October 1987, patient age was no longer used in combination with the presence of a complication or comorbidity (CC) to define DRGs. We present the results of one of the studies that led to this change. We analyzed inpatient charges for 1984 and found that the use of age in combination with CC is inappropriate for grouping Medicare patients. The original DRGs resulted in an underpayment for CC patients and an overpayment for patients 70 years or older without a CC.