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Diagnosis related groups

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You work for the local hospital, and your manager would like some clarification on diagnosis-related groups (DRGs). Discuss Medicare reimbursement in the context of DRGs for reimbursement purposes.

Be sure to address the following:

â?¢use of DRGs in both inpatient and outpatient settings
â?¢an example of a DRG
â?¢the purpose of DRG use in medical coding and billing
â?¢the relationship between DRGs and the ICD-9-CM/ICD-10 coding system

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* The use of DRG in inpatient settings: Medicare established the inpatient prospective payment system to provide payments to hospitals for the treatment of Medicare beneficiaries in inpatint hospital settings. Under the IPPS system each hospital inpatient stay is assigned to a DRG based on the patient' characteristics and procedures performed during his/her hospital stay. Medicare pays the hospital a prospectively determined amount that is associated with the selected DRG.
The use of DRG's in outptient settings: ...

Solution Summary

This solution provides an explanation of medicare reimbursement in the context of diagnosis related groups (DRG's).

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Diagnosis Related Group

See the attached file.

Case Mix Index & the DRG's

Under the Prospective Payment System (PPS), hospitals are paid a set fee for treating patients in a single DRG category, regardless of the actual cost of care for the individual patient.

Definition of Diagnosis-Related Group (DRG).The DRG is the inpatient classification that categorizes patients who are similar in terms of diagnoses & treatment, age, resources used & lengths of stay.

Definition of Case Mix Index (CMI)- CMI is the average of the sum of the relative weights(RWs) of all patients treated during a specific time period. Case Mix index formula is CMI= Total Relative Weight divided by the Total Volume


Attached is an excel spreadsheet. The 1st question is a simple DRG report which requires the determination of the Case Mix index.

This is a matter of determining the total relative weight & the total volume.& then calculating the CMI using the formula CMI=TRW/TV

Table 1: 1st multiply DRG identifier A by taking the relative weight of A x the volume ( total number of patients seen) DRG A 2.133 x 15 =31.995. Do that for each DRG identifier & then total. This total is the Total Relative Weight.
2nd Total the number of patients seen = the Total Volume.
3rd determine Case Mix Index with these numbers above, using formula provided. CMI=TRW/TV

Table 2 & 3 : Determine the CMI . Most of the calculation totals have already been completed for Total Relative Weight. Complete the missing TRW. The listed information in each Table is done so purposely . Why? Because it not uncommon to take your board certification exams & they will give you TMI- learn how to weed out what is NOT needed.

Hint: Use the Auto Sum (Greek E symbol) to determine TV & TRW

Table 4 determine CMI.

Lastly; list the four steps to determine the MS-DRG & describe these steps.

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