Upcoding Linked To Up To Two-Thirds Of Growth In Highest-Intensity Hospital Discharges In 5 States, 2011-19.

Area of Science:

• Health Economics
• Healthcare Policy
• Medical Billing

Background:

• Diagnosis-based payment systems may incentivize providers to increase patient severity coding for higher reimbursement.
• Upcoding, or assigning a higher complexity than appropriate, can be fraudulent or reflect true patient acuity.

Purpose of the Study:

• To estimate the increase in Medicare Severity Diagnosis-Related Group (MS-DRG) upcoding between 2011 and 2019.
• To quantify the financial impact of MS-DRG upcoding on hospital payments from various sources.

Main Methods:

• Utilized all-payer discharge-level data from five states for the period 2011-2019.
• Employed statistical adjustments for patient, length-of-stay, and hospital characteristics to isolate coding behavior changes.

Main Results:

• The number of discharges with the highest MS-DRG coding intensity rose by 41% from 2011 to 2019.
• After adjustments, the estimated increase attributable to coding behavior changes was 13%.
• In 2019, upcoding was associated with $14.6 billion in hospital payments, including significant amounts from private health plans, Medicare, and Medicaid.

Conclusions:

• Findings indicate a substantial increase in MS-DRG upcoding, impacting healthcare costs.
• The study underscores the need for payment models that mitigate coding distortions and ensure accurate resource allocation.