Diagnosis Related Groups (DRGS)

Background

DRGs were first developed by Robert Fetter and John Thompson at Yale University in the early 1970s, with support from the federal agency Health Care Financing Administration (HCFA), now the Centers for Medicare and Medicaid Services (CMS). This system included the Medicare population in addition to newborn, pediatric, and adult populations.

DRGs were first implemented on a large scale in New Jersey in the late 1970s. The New Jersey Department of Health used DRGs as a form of prospective payment whereby hospitals were paid a fixed amount for a given patient. Since 1983, CMS has taken over the control of the Medicare DRG system as a form of prospective payment for hospitals, and the agency has been responsible for any revisions to the definitions for Medicare DRGs.

As a concept, DRGs were originally created to classify hospital admissions of patients who had similar International Classification of Disease, 9th Edition (ICD-9) codes, or ICD-9 codes, so that the relationship between the types of patients that a hospital treated could be used to better understand the costs that the hospital incurred. The general guidelines of DRGs were that they must use patient data that are routinely collected by hospitals, such as ICD-9 codes, age, and gender; they should include patients who have a similar pattern of resource use; [Page 297]they should include patients with a similar clinical condition; and there should be a manageable number of DRGs that include all types of patients who are encountered as inpatients. The required data elements of a DRG include the principal and secondary diagnosis codes; procedure codes; and patient's age, gender, and discharge disposition.

DRGs are grouped in a hierarchical manner. First, DRGs are grouped into 25 major diagnostic categories (MDCs) that relate to a single organ system or etiology. HIV and multiple significant trauma were the two most recently added MDC groups. Next, MDCs are grouped as either surgical or medical categories. Last, patients in surgical categories are grouped according to the type of procedure performed, while medical patients are grouped according to their principal diagnosis. Some categories under DRGs have been designated with complications and comorbidities (CCs). This represents a condition that causes an increase in the length of stay by at least a day for 75% of patients. Age is also used to define some categories of DRGs.

The first Medicare DRG category is craniotomy with CCs for those greater than or equal to 17 years of age, while Medicare DRG category 316 relates to renal failure. Medicare DRG category 531 is for spinal procedures with CCs.

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