Facility DRG Validation

Policy No: 111
Originally Created: 03/01/2017
Section: Facility
Last Reviewed: 01/01/2019
Last Revised: 01/01/2019
Approved: 01/17/2019
Effective: 03/01/2019

This policy applies to inpatient hospital services reimbursed by MS-DRG payment methodologies.


Medicare Severity Diagnosis Related Groups (MS-DRG or DRG)
A statistical system of classifying any inpatient stay into groups for the purposes of payment. DRGs are assigned by a "grouper" program based on ICD (International Classification of Diseases) diagnoses, procedures, age, sex, discharge status, and the presence of complications or comorbidities.

International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM)
A morbidity classification system for classifying diagnoses and reason for visits in all health care settings for the purpose of coding and reporting. Valid for dates of service prior to 10/1/2015.

International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM)
A morbidity classification system for classifying diagnoses and reason for visits in all health care settings for the purpose of coding and reporting. Valid for dates of service 10/1/2015 and following.

Principal Diagnosis
The condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.

Additional (Other) Diagnoses
Additional conditions that affect patient care in terms of requiring: clinical evaluation; or therapeutic treatment; or diagnostic procedures; or extended length of hospital stay; or increased nursing care and/or monitoring.

The Uniform Hospital Discharge Data Set (UHDDS) defines Other Diagnoses as "all conditions that coexist at the time of admission, that develop subsequently, or that affect the treatment received and/or the length of stay. Diagnoses that relate to an earlier episode which have no bearing on the current hospital stay are to be excluded."

Present on Admission (POA) Indicator
Condition(s) present at the time the order for inpatient admission occurs. The POA indicator is intended to differentiate conditions present at the time of admission from those conditions that develop during the inpatient admission.

Major Complication or Comorbidity (MCC) and Complication or Comorbidity (CC)
The severity of the illness or condition is determined by the presence or absence of MCCs and CCs. The presence of these will impact the DRG assignment and subsequent hospital payment.

Policy Statement

The DRG and principal diagnosis are confirmed upon discharge, not based on the clinical suspicion at the time of admission. While specific diagnosis codes should be reported when they are supported by the available medical record documentation and clinical knowledge of the patient's health condition, there are instances when signs/symptoms or unspecified codes are the best choices for accurately reflecting the healthcare encounter.

Clinical findings and physician documentation in the medical record must support all diagnoses and procedures billed including the MCC and CC that would affect the billing.

Our health plan will not allow reimbursement for diagnoses, procedures, MCCs or CCs that are not clearly documented in the medical record.

DRG Validation Audits:
DRG Validation Audits are conducted by our health plan to confirm DRG assignment and accuracy of payment. DRG validation involves review of medical record documentation to determine correct coding on a claim submission and in accordance with industry coding standards as outlined by the Official Coding Guidelines, the applicable ICD Coding Manual, UHDDS, and/or Coding Clinics.

DRG Validation Audits include, but are not limited to the following:

  • Verification of the diagnostic code assignments
  • Verification of the procedural code assignments
  • Verification of present on admission indicator assignments
  • Verification of the sequencing of codes
  • Verification of DRG grouping assignment and associated payment
  • Verification of the MCC and CC when reported

DRG Validation audits will be performed using the medical record documentation available at the time of audit. Audit findings will communicate the official industry sourced documents, including Official Coding Guidelines, the applicable ICD Coding Manual, UHDDS guidelines and Coding Clinics.

DRG Validation Audits may result in revisions to the diagnosis codes and/or procedural codes. These revisions may result in a change in the DRG assignment.


ICD-10-CM Official Guidelines for Coding and Reporting 2019 - Centers for Medicare & Medicaid Services (CMS)

Medicare Claims Processing Manual, Chapter 23 - Fee Schedule Administration and Coding Requirements


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