Examining the ICD-10 Transition’s Impact on Medicare Hospital Payments

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The transition from the ICD-9-CM version of the MS-DRGs to the ICD-10-CM version of the MS-DRGs will have a limited impact on aggregate payments to hospitals, according to the authors of a new AHIMA white paper.

It has been challenging to evaluate the impact ICD-10-CM will have on Medicare Severity Diagnosis Related Groups (MS-DRGs) because the ICD-10 MS-DRGs replicate the ICD-9 MS-DRGs and do not take into account the increased specificity of ICD-10. And because there is no database of ICD-10-coded records to work from, there’s not enough data to recalculate the new MS-DRG payment weights, according to the white paper “The Impact of the Transition to ICD-10 on Medicare Inpatient Hospital Payments.”

To achieve more accurate estimates, the authors used a simulated database that used fiscal year 2013 Medicare Provider Analysis and Review data.

According to the authors’ analysis, the ICD-9 MS-DRG and ICD-10 MS-DRG assignments differed for 1.07 percent of the admissions. The ICD-10 MS-DRG assignment was to a higher paying MS-DRG in 0.41percent of the admissions, leading to a payment increase of just 0.13 of a percent. The ICD-10 MS-DRG assignment was to a lower paying MS-DRG in 0.66 percent of the admissions, resulting in a payment decrease of 0.17of a percent. The net payment change due to differences in MS-DRG assignment was -0.04 of a percent (i.e., 4 one-hundredths of one percent of the ICD-9 based MS-DRG payments). Thus, estimated payment increases and decreases due to changes in MS-DRG assignment essentially netted out.

The authors assert that the change in coding practices will have minimal impact on MS-DRG assignment since ICD-10 MS-DRGs are a replication of ICD-9 MS-DRGs and don’t make use of the precision of the new coding guidelines.

“The transition from the ICD-9 version of the MS-DRGs to the ICD-10 version of the MS-DRGs will have a minimal impact on aggregate payments to hospitals (-0.04 of a percent) and on the distribution of payments across hospital types,” the authors wrote. “Although the transition from the ICD-9 version of the MS-DRGs to the ICD-10 version resulted in 1.07 percent of the patients being assigned to different MS-DRGs, overall payment increases and decreases due to a change in MS-DRG assignment essentially net out.”

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