Medicare DRG System Summary

The Center for Medicare and Medicare Services used to be called The Health Care Financing Administration. This agency implemented DRGs in 1983 for the Inpatient Prospective Payment System (IPPS). In 1989, a project at Yale University developed an updated DRG system that is based on the severity of the illness. Later severity DRGs were developed in 1993 after the Center for Medicare and Medicaid Services re-evaluated the use of complications and comorbidities within the Medicare DRGs. The center implemented this system in 1994 but there was never a requirement date for implementation for this system. This system focused only focused on the intensity of resources used to treat the illnesses, while the US healthcare system needed to move past

This led to the development of a new method that takes into account anything that affects the cost of delivering patient helathcare services. This includes what is called a case mix which is an interrelated set of patient attributes such as the severity of illness, risk of mortality, prognosis, treatment difficulty, need for intervention, and resource intensity. This helped also with the development of the APR DRG system which is a clinical model with four severity of illness and risk of mortality subclasses for each base APR DRG. These subclasses are broken down into four levels to include minor, moderate, major, and extreme. APR DRGs were used by hospitals for internal quality improvement and by many states for public reporting. Severity of illness describes the extent of the physiologic decompensation or organ system loss of function. The risk of mortality indicates the patient’s likelihood of dying. The systems are differentiated by trajectory of development, clinical logic, severity classification structure, and level of complexity. There were other severity adjusted systems within this system. Implemented with discharges on or after October 1, 2007, The Medicare Severity DRGs (MS-DRGs), was adopted for use with Medicare’s Inpatient Prospective