March 2013

APR-DRGs in the Medicaid Population
By Judy Sturgeon, CCS, CCDS
For The Record
Vol. 25 No. 5 P. 6

While many state Medicaid agencies continue to pay for inpatient hospitalizations by the tried-and-true Medicare-severity diagnosis-related group (MS-DRG) system, more are turning to the all patient refined (APR)-DRG system.

The MS-DRG considers the reason for admission, the most costly secondary diagnosis based on a national average, and any particularly costly procedures—usually one related to the reason for admission. MS-DRGs frequently are described as a way to demonstrate how sick patients are, but in reality, they reflect how costly they tend to be, on average, in a large population. An individual patient can be quite sick and die—quickly—and not be expensive to treat in the hospital. Another patient may have a chronic illness that needs IV medication or inpatient monitoring and stay longer than usual in the hospital but not be particularly expensive to treat compared with another who needs extensive medical and surgical intervention.

APR-DRGs were developed to also reflect the clinical complexity of the patient population. Just as with MS-DRGs, an APR-DRG payment is calculated by using an assigned numerical weight that is multiplied by a fixed dollar amount specific to each provider. Each base APR-DRG, however, considers severity of illness and risk of mortality instead of being based on a single complication or comorbidity. More than one significant diagnosis can add to the APR’s clinical severity, as can procedures, age, discharge disposition, and even sex. Because of the four levels of severity of illness or risk of mortality (minor, moderate, major, severe), the APR-DRG not only facilitates reimbursement but also enables internal and public reporting on these two factors.

Population Factors
A facility’s Medicaid patient population has a significant impact on reimbursement. There are likely to be numerous pregnant patients, newborns, and children as well as the occasional trauma patient. However, this type of age group and medical mix usually does not include a high percentage of severely ill patients.

If the Medicaid population is low, chief financial officers will want to make sure that coding is accurate and billing processes are adapted to the new methodology. Public and teaching hospitals in particular need to be on top of the change. No matter the setting, there are effective ways to help minimize potential losses in a reduced-risk patient mix with a pay-for-severity reimbursement methodology.

In hospitals where APRs are a new consideration, performing a comparative analysis is an important step toward understanding the potential impact to the revenue cycle. From such a project, important data can be gleaned. For example, the decision-support staff or the state hospital association should be able to assist in providing information regarding what would have been the financial repercussions had all Medicaid patients in the past year been paid by their respective APR-DRG instead of the MS-DRG.

Dutiful Documentation
The need for physician education regarding clear, specific documentation of diagnoses and procedures cannot be overemphasized. To arrive at the correct MS- or APR-DRG, several items must be included in the documentation, including the reason(s) for admission, all secondary diagnoses that affect care on the current encounter, the cause of those diagnoses, and procedure details. Any facility without a clinical documentation improvement program needs to seriously explore the possibility of establishing one.

 If there is time to focus on only two areas of documentation improvement, choose cause and severity. What caused the inpatient admission? What led to the problem? For example, was the patient admitted for breast milk jaundice or jaundice due to cephalohematoma? Other considerations include jaundice and positive direct antigen test due to blood incompatibility, hypotonia due to maternal analgesia, a drop in hemoglobin due to acute blood loss during delivery, additional pitocin and intramuscular injection of methergine to control blood loss secondary to uterine atony, elevated blood pressure, and proteinuria secondary to mild preeclampsia .

Severity of illness separates MS-DRGs from their APR counterparts. Abbreviations such as CRI, AKI, and COPD and simple diagnoses such as anemia, pneumonia, and bacteremia should be further qualified when more detail is known. Does the patient have stage 3 chronic kidney disease, acute kidney injury (as opposed to insufficiency), acute exacerbation of extrinsic asthma, or acute blood-loss anemia superimposed on chronic iron-deficiency anemia?

Coders to the Rescue
After physicians, coders are next in line to preserve the accuracy of APR-DRG assignments. Quite a few common neonatal and obstetric conditions that change an MS-DRG no longer affect payment in the APR-DRG system. Conversely, several other diagnoses that have no effect on the MS-DRG now have significant impact on APRs.

To compensate for these changes, coder education is essential. They should study the basics of the neonatal and obstetric chapters in the Official Coding Guidelines and review the many Coding Clinic publications that provide both details and examples specific to the high-volume Medicaid patient population.

Make certain that the pressure to get claims out the door does not discourage the staff from coding completely and accurately or from waiting for pending documentation that can affect the final DRG. Determine whether coders are querying the provider when appropriate. If physicians are loath to respond to those queries, then work with their department chiefs to improve the response rate.

Last, but certainly not least, coders should evaluate the utilization review, billing, and denials management processes. If the documentation is perfect and the coders translate every diagnosis and procedure precisely but one of these areas still is not on top of its game, reimbursement may be reduced or denied. If a Medicaid managed care group did not receive notification of admission or accurate clinical information was incomplete, the APR-DRG can be lowered or the entire payment denied based on a contract technicality. If the billing is not timely or the claim is not prepared with the required identification numbers for providers and facility, once again payment can be delayed or denied.

If the error causing the denial can be corrected and overturned by qualified and conscientious professionals, a facility can still recover from this type of potential loss.

If your facility’s Medicaid admissions are now or will soon be paid by APR-DRGs, be assured that it is no longer business as usual and that old adage about the whole being greater than the sum of its parts is true. If each department that affects a patient’s APR-DRG is working efficiently, then the sum of their efforts will ensure the best outcomes for the health of the hospital’s revenue cycle and its public image derived from APR-DRG reporting.

— Judy Sturgeon, CCS, CCDS, is the clinical coding/reimbursement compliance manager at Harris County Hospital District in Houston and a contributing editor at For The Record. While her initial education was in medical technology, she has been in hospital coding and compliance for 22 years.