DRG AUDIT AND DRG VALIDATION

DRG Medical Record Validation is by far the most important tool for use by Medicare Advantage Plans (and groups/employers using Reference Based Pricing) to ensure accurate payment based on the actual principal patient diagnosis. And DRG audit of individual hospital admissions is becoming more common with self-funded employer groups who are using Medicare Reference Based Pricing.

Originally DRGs were used primarily by Medicare as a reimbursement mechanism for Medicare inpatient stays. MS-DRG is the standard Medicare version. DRG is by far the most common of all the Medicare Prospective Payment Methods. Over time other payers, especially Medicaid plans, desired a method of inpatient reimbursement that was tied to diagnosis and intensity of service. Other DRG systems including AP-DRG (All Patient DRG) and APR-DRG (All Patient Refined DRG), among others that were developed for varied populations. Many of these other DRG systems were developed as proprietary third-party systems. International payers also use various types of third-party DRG systems.

However, MS-DRG (Medicare Severity DRG) remains as the standard system used by Medicare for acute inpatient hospitalizations. When Medicare Advantage plans or pay as Medicare self-funded employer groups, are confronted with inpatient care, they rely primarily on the MS-DRG Medicare system to pay inpatient claims.

The most important variable of the DRG determination is the “Principal Diagnosis”. While other factors such as secondary diagnoses, surgical procedures, age and sex of the patient, and discharge status affect DRG code outcome, Principal Diagnosis is the most important single determinant of DRG code assignment. In our experience, an incorrect Principal Diagnosis leads to an incorrect DRG medical coding assignment 98% of the time, leading to inappropriate upcoding of DRG reimbursement.

Medicare gives a definition as: “The principal diagnosis is the condition established after study to be chiefly responsible for the admission. Even though another diagnosis may be more severe than the principal diagnosis, the principal diagnosis, as defined above, is entered. Entering any other diagnosis may result in incorrect assignment of a DRG and an overpayment to a hospital under PPS [Prospective Payment System].“

WHO DETERMINES PRINCIPAL DIAGNOSIS WHICH CONTRIBUTES TO DRG ASSIGNMENT?

The correct and expected answer should be the treating physicians and other clinical staff who provide actual patient care. However, hospitals often determine principal diagnosis by using certified coders or registered health information technicians who "abstract" diagnoses and other clinical data from the electronic medical record. Some use artificial intelligence applications to glean keywords from electronic medical records. Although the patient care has been delivered by clinically experienced doctors and nurses, the medical record abstraction process is often accomplished by non-clinical individuals who rely on software algorithms and decision trees to generate billing diagnoses and procedures from the medical record. In our experience (on average) 35-40% of DRG-based hospital bills have the wrong principal diagnosis which leads to incorrect (usually higher) DRG reimbursement. Reimbursement may be several hundred percent higher for the incorrect DRG medical code. A common example is a sepsis diagnosis when the true diagnosis might have been a complicated pneumonia. These different diagnoses map to different DRGs.

EIGHT REASONS WHY YOU SHOULD CHOOSE HEALTHCLAIM REVIEW® FOR YOUR DRG AUDITS

Considine & Associates Inc. doing business as HealthClaim Review® is URAC-accredited as an IRO (Independent Review Organization) and has been since 2006. That means the company has an extensive multispecialty physician review panel covering all major medical specialties. As of 2026, our company has been in business for 30 years.
Some companies use software or AI to abstract information from scanned medical records. Other companies employ nurses or DRG coders to do the initial review, or even all of the review. The process might be overseen or supervised by physicians. This is not the same as a 100% physician review. Our DRG reviews are performed solely by board-certified (Internal Medicine) physicians, most of whom are subspecialty board certified.
Our physician reviews are HI (Human Intelligence) rather than AI (Artificial Intelligence) based. We are an “HI driven” company.
DRG reviews are delivered to the client within 24-72 hours. This is a significant considering they are full medical record reviews by actual physicians, not in-house Medical Directors, nurses or coders. They are not based on rapid scanning techniques using artificial intelligence.
If you use vendors who do not do 100% physician review, you may still need a specialist physician for your second level or appeals for coding validation reviews. In that case, we are here to help.
After using our DRG Audit services with particular hospitals, it is common to see an improvement in hospital behavior with a decreased number of incorrect Principal Diagnoses and incorrect DRG assignment. The DRG audit process creates a “sentinel effect.” This process is often supported by the health plan’s Medical Director(s) who interact with contracted providers in a positive manner. We provide the content for that interaction through our actual case reviews.
You already do your own DRG audits in-house but would like an outside opinion on selected cases. We can help with that.
There are no long-term contracts of any kind. As with all HealthClaim Review® products, you are not obligated by contract to send any particular number of cases.

DRG MEDICAL RECORD VALIDATION

Medicare Advantage Plan DRG Reviews and DRG Audits
Principal diagnosis determination
Correct identification of DRG codes
Medical records-based analysis
Identify improper diagnoses leading to wrong DRG selection
Commonly abused diagnoses unmasked
Detailed case discussion by board-certified MD specialist
Validation of each diagnosis and procedure code
Initial review determinations
Appeals review determinations
Physician Specialist-based case review
Rapid turnaround
Summary reporting and results analysis
DRG Review for ERISA groups using Reference Based Pricing
DRG Review for commercial fully-insured health plans

DRG REPRICING USING EXISTING UB-04 DATA

Repricing only, as requested by client
Use existing UB-04 data to determine proper DRG reimbursement
Does not require medical records
Accurate reimbursement based on DRG Grouper technology