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Payout neutrality using the new MS-DRGv26 is a debate...simulate your payments now

The released version of ICD-10 based MS-DRGs by CMS is technically only a "draft" and the final version expected by 3rd quarter of 2014 is still due for the federal rulemaking process. CMS initiated the project with an intention to produce a grouper that can replicate the existing DRG logic using ICD-10 codes and assign patients the same MS-DRG they would have been assigned to, if they were coded in ICD-9-CM. This means that Medicare is aiming towards financial neutrality for their trading partners.

Frankly speaking, if such a thing is possible, then ICD-10-CM/PCS codes and the ICD-9-CM codes are no different. Then why is US healthcare moving for ICD-10? Obviously, not just to upgrade from its precursor ICD-9 or to position itself better in the international health space. I guess, the correct answer is to use ICD-10 as a catalyst for mitigating the long standing concerns- 1.) compromised quality of care and 2.) escalating healthcare cost. ICD-10's clinical granularity promises better care but, its inherent ability to identify the wider disparity in severity (and presumably resources) than the ICD-9 predecessor is "the power" to make payouts/reimbursements more tailored and precise.

In this context, the CMS initiative to keep the MS-DRGs intact irrespective of being induced by ICD-9 or ICD-10 is highly debatable (from ICD-10's financial incentive perspective). Why? Let me site two examples-

a. The ICD-9 code 39.31 (SUTURE OF ARTERY) today maps to MDC 5, MS DRG 252-254. Post ICD-9 to 10 conversion this source code having 195 target codes (as per GEM) will be in the same MDC 5, but surprisingly in a different DRG, i.e. 237-238.

b. Post 2013, ICD-10 codes OB717DZ or OB718DZ will derive DRG 165. But obliging to the CMS MS-DRG conversion principle if any one intends to map those ICD-10 codes back to ICD-9, OB717DZ and OB718DZ ICD-10 codes will get mapped to ICD-9 code 96.06, Other Intubation Respiratory Tract, which will be then altogether a different DRG (DRG 203).

With many such empirical data, it's evident that maintaining payout neutrality in ICD-10 world is going to be real challenge & arduous task. In a nutshell there is an inherent need to split the MS-DRGs acknowledging the clinical depth of the new ICD codes. Moreover, once CMS has collected a year or two of ICD-10-based data the landscape of DRGs is sure to change considerably.

It is never a business wise decision to wait till 2015. Right away one has to initiate some intelligent payout simulation  and make some payment changes and that's obvious - such as when the ICD-10 codes clearly distinguish minor and major procedures and it doesn't make sense to lump them together now that they know exactly which procedure was performed by the provider(because of the increased specificity in ICD-10-PCS).


Yes, Infact Industry has to start somewhre in DRG grouping for ICD10 when transition Happens. The best way to start is to achieve the "financial Neutrality" as much as possible because of DRG Grouping when ICD10 transition happens. Thats where CMS would have made an attempt in remaping back ICD10 to ICD9 and then to DRGs to achieve financial neutrality as much as possible.

Though this cannont be 100% achieved due to inherent design of the ICD10 code (more detail and granualirity to explain the severity of the Disease) as you explained in the example. The ultimate aim is to design 'innovative contracts' using ICD10 with help of enoromous 'details' it gives - In long term Industry is looking for "NEW REVENUE GENERATION from this transition BESIDES ACHIEVING COMPLIANCE"...That's How I read this...

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