Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Medicare Payments for DRG 296: 
Nutritional and Miscellaneous Metabolic 
Disorders 
JUNE GIBBS BROWN 
Inspector General 
APRIL 1999 
OEI-03-98-00490  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Philadelphia office prepared this report under the direction of Robert A. Vito, Regional 
Inspector General, and Linda M. Ragone, Deputy Regional Inspector General.  Principal OEI 
staff included: 
REGION  HEADQUARTERS 
David Graf, Project Leader  Tricia Davis, Program Specialist 
To obtain copies of this report, please call the Philadelphia Regional Office at (800) 531-9562. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E  S U M M A R Y

PURPOSE 
To identify hospitals with atypically high billing patterns for patients with nutritional and 
miscellaneous metabolic disorders (DRG 296). 
BACKGROUND 
Under Medicares prospective payment system, a hospitals payment amount is determined by 
taking a hospitals individual base payment rate and multiplying it by the weight of the diagnosis 
related group (DRG) assigned to the patient stay.  A DRGs weight is determined by the intensity 
of resources, on average, that are needed to treat that kind of case.  The higher the relative 
weight, the greater the reimbursement. 
Medicare reimbursed hospitals almost $900 million for DRG 296 in 1996.  DRG 296 is coded for 
patients with principal diagnoses that include hypovolemia, nutritional marasmus, abnormal 
weight gain, and anorexia.  This code can trigger a higher medicare reimbursement compared to 
other codes where patients may exhibit similar symptoms.  DRG 182 (Esophagitis, 
Gastroenteritis, and Miscellaneous Digestive Disorders) is one such code. 
The Health Care Financing Administration (HCFA) contracts with two Clinical Data Abstraction 
Centers to collect clinical data from hospital medical records.  The Abstraction Centers are 
responsible for validating a random sample of claims from all Medicare inpatient hospital 
discharges.  The results of the 1996 validation work showed that 7 percent of DRG 296 
discharges sampled should have been coded to a lower-weighted DRG.  The HCFA estimated 
that the total overpayment attributable to incorrect DRG 296 classifications was $6.7 million. 
In several recent Office of Inspector General reports we recommended that HCFA perform 
routine monitoring and analysis of hospital billing and clinical data to proactively identify aberrant 
patterns of DRG upcoding. 
For this inspection, we analyzed the Medicare Provider Analysis and Review file to identify 
hospitals with atypically high billings for DRG 296 in fiscal years 1993 to 1996. 
FINDINGS 
Sixty hospitals had atypically high Medicare billings for DRG 296. 
A relatively small number of hospitals (60 of 4,894) had abnormally high DRG 296 discharges 
compared to national figures.  These 60 hospitals were identified based on two criteria: (1) a large 
proportion of DRG 296 discharges to total discharges in 1996, and (2) a significant increase in the 
proportion of DRG 296 discharges to total discharges between 1993 and 1996. 
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i  For the 60 hospitals, DRG 296 discharges more than doubled from 1,972 in 1993 to 4,471 in 
1996.  Nationally, DRG 296 discharges nearly stayed unchanged from 233,915 in 1993 to 
233,592 in 1996. 
Between 1993 and 1996, the proportion of DRG 296 discharges to all discharges for the 60 
hospitals nearly doubled from 2.58 percent to 5.08 percent.  In contrast, the national proportion 
decreased 5 percent from 2.10 percent in 1993 to 1.99 percent in 1996. 
The questionable billing of DRG 296 could have a  financial impact on the Medicare 
program. 
For the 60 hospitals, the number of DRG 296 discharges exceeded national norms by 2,316 cases. 
Earlier DRG validation work performed by the Office of Inspector General (OIG) found an 
average per discharge difference of $514 between DRG 296 and the DRG that should have been 
coded.  Based on this amount, we estimate that potential overpayments could be as high as $1.2 
million or 8 percent of the $14.4 million paid to these hospitals for DRG 296 in 1996. 
The true upcoding error rate can only be determined by undertaking a detailed claims review at 
each hospital.  Therefore, the potential overpayments at each hospital would vary according to 
actual coding error rates. 
NEXT STEPS 
As noted in the background, we previously recommended that HCFA perform routine monitoring 
and analysis of hospital billing and clinical data to proactively identify aberrant patterns of 
upcoding.  The HCFA agreed with the recommendation and outlined an extensive program to 
respond to it.  We offer the information in this report as insight into another possible problem 
DRG for HCFA to consider when refining its plan.  We recognize that only record reviews by 
trained professionals will establish if incorrect coding has occurred at the 60 hospitals identified. 
Meanwhile, we have referred the 60 hospitals to our Office of Investigations.  We look forward to 
continuing collaboration with HCFA on this matter. 
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ii  T A B L E  O F  C O N T E N T S

PAGE

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Atypically high DRG 296 billings at 60 hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Potential financial impact  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

NEXT STEPS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

APPENDICES

A: Clinical Data Abstraction Centers 1996 Validation Work for DRG 296  . . . . . . . . . . . .  A-1

B: Office of Inspector Generals Validation Work for DRG 296 . . . . . . . . . . . . . . . . . . . . . B-1
 INTRODUCTION

PURPOSE 
To identify hospitals with atypically high billing patterns for patients with nutritional and 
miscellaneous metabolic disorders (DRG 296). 
BACKGROUND 
In 1996, Medicare reimbursed hospitals almost $900 million for patients whose cases were 
categorized as DRG 296, the code for nutritional and miscellaneous metabolic disorders with 
complications and co-morbidities for patients over 17 years old.  Principal diagnosis under DRG 
296 include hypovolemia, nutritional marasmus, abnormal weight gain, and anorexia.  But, there 
are a total of 62 diagnosis and procedure codes that can lead to categorizing a case as DRG 296. 
Hospital Reimbursement for Diagnostic Related Groups 
Diagnostic related groups (DRGs) are categories used to determine Medicare reimbursement for 
patient stays under the prospective payment system established by Congress in 1983.  The actual 
Medicare payment amount is calculated by multiplying the individual hospitals base payment rate 
by the weight of the DRG.  The weight of a DRG is determined by the intensity of resources, on 
average, that are needed to treat that kind of case. 
When a patient is discharged, the physician summarizes information on a discharge face sheet. 
This information includes principal diagnosis, additional diagnoses, and procedures performed 
during the stay.  Hospitals use codes from the International Classification of Diseases, Ninth 
Edition, Clinical Modification (ICD-9-CM) to report diagnosis and procedure information.  A 
coder, trained in medical classification, uses all this information to assign the most appropriate 
ICD-9-CM code.  A patients entire medical record is reviewed as part of the coding process. 
A hospital receives payment for treating a Medicare patient by preparing a claim and forwarding it 
to the Medicare fiscal intermediary.  The intermediary processes the claim through a series of 
automated screens.  These screens, called the Medicare Code Editor, identify cases that need 
further review before being classified into a DRG.  Cases are classified by the GROUPER 
software program into the appropriate DRG.  This program classifies each case into a DRG based 
on diagnosis, procedure code, and demographic information.  Hospital reimbursement is then 
calculated by multiplying the weight of the assigned DRG by the hospitals individual base 
payment rate. 
Reimbursement increases or decreases with the relative weight of the DRG.  Sometimes patients 
exhibit similar symptoms, but their cases are assigned to different DRGs.  A mis-classification of a 
DRG can result in an overpayment.  For example, the weight of DRG 296 (Nutritional and 
Miscellaneous Metabolic Disorders) was 0.9166 in 1996.  In the same year, the weight of DRG 
182 (Esophagitis, Gastroenteritis, and Miscellaneous Digestive Disorders) was 0.7794.  If a case 
that should have been DRG 182 was incorrectly classified as DRG 296, the overpayment would 
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1  be approximately $500 per case. 
The Health Care Financing Administrations DRG Validation Work 
The Health Care Financing Administration (HCFA) contracts with Medicare Peer Review 
organizations (PROs) to ensure that care provided to Medicare patients is reasonable, necessary, 
and provided in the most appropriate setting.  The PROs are required to contract out DRG 
validation efforts to two Clinical Data Abstraction Centers.  The Abstraction Centers validation 
efforts provide HCFA with an overall assessment of DRG coding, and identifies problematic 
DRGs. 
The 1996 validation effort found that 10 percent of the sample DRG 296 cases were improperly 
coded.  The sample consisted of 20,152 claims from all Medicare inpatient hospital discharges. 
There were 424 sample discharges for patients with a diagnosis of nutritional and metabolic 
disorder, and 43 of 424 were improperly coded.  Thirty-one of the 43 improperly coded cases 
resulted in overpayments to hospitals.  These 31 cases should have been coded to 11 less 
expensive DRG codes.  For example, 16 of the cases should have been coded DRG 182.  A 
complete listing of the appropriate DRG codes can be found in Appendix A.  The total estimated 
overpayment attributable to DRG 296 discharges in 1996 was $6,656,128. 
The Office of Inspector Generals DRG Validation Work 
In a study entitled, Using Software to Detect Upcoding of Hospitals Bills (OEI-01-97-00010, 
August 1998), the Office of Inspector General (OIG) performed DRG validation work on a 
sample of 2,622 Medicare inpatient hospital discharges.  Of the 2,622 discharges, 108 were for 
patients with a nutritional and metabolic disorder diagnosis.  The results of this validation showed 
that 17 percent of the sample DRG 296 discharges (18 of 108) were improperly coded.  Most (14 
out of 18) of the erroneously coded discharges resulted in overpayments to the hospitals. 
The erroneously coded DRG 296 discharges should have been coded to four less expensive 
DRGs.  Six of the erroneously coded discharges should have been coded to DRG 182 and 4 
should have been coded to DRG 297 (Nutritional and Miscellaneous Metabolic Disorders Age > 
17 without Complications and Comorbidities).  A complete listing of the appropriate DRG codes 
can be found in Appendix B. 
Other Office of Inspector General DRG Work 
In a follow-up to the Office of Inspector General report just mentioned, the OIG sent an advisory 
report to HCFA entitled, Monitoring the Accuracy of Hospital Coding (OEI-01-98-00420, 
January 21, 1999).  We pointed out that the DRG system was vulnerable to upcoding, 
particularly within certain DRGs.  We recommended that HCFA perform routine monitoring and 
analysis of hospital billing data and clinical data to identify aberrant patterns of upcoding. 
The OIG has also released two reports focusing on hospital coding patterns over time for DRGs 
475 and 416.  Medicare Payments for DRG 475: Respiratory System Diagnosis with Ventilator 
Support (OEI-03-98-00560, January 1999), and Medicare Payments for Septicemia (OEI-03-98-
00370, March 1999) found a relatively small number of hospitals with atypically high billings for 
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2  DRGs 475 and 416.  The methodology in these reports demonstrated a technique that could be 
used to focus HCFAs limited resources in identifying potential cases of DRG upcoding.  This 
report on nutritional and metabolic disorders provides another example of how this technique 
could be used. 
METHODOLOGY 
We extracted data from the Medicare Provider Analysis and Review (MedPAR) file for fiscal 
years 1993 to 1996.  The MedPAR file contains Medicare DRG discharge information for all 
hospitals.  For each hospital that had at least one DRG 296 discharge (4,894 hospitals), we 
determined the number of DRG 296 discharges and the total overall number of discharges by 
year. 
We calculated the proportion of DRG 296 discharges to total discharges for each hospital in 
1996.  We found that DRG 296 discharges accounted for more than 3.5 percent of all discharges 
in just 15 percent of hospitals.  We then determined the proportion of DRG 296 discharges to 
total discharges for 1993 and compared it to the proportion calculated for 1996.  Between 1993 
and 1996, the proportion had increased by more than 50 percent in 15 percent of the hospitals. 
To identify hospitals with atypically high DRG 296 billing patterns, we selected hospitals with the 
following criteria: (1) DRG 296 discharges accounted for more than 3.5 percent of all discharges 
in 1996, and (2) the proportion of DRG 296 discharges to total discharges had increased by more 
than 50 percent between 1993 and 1996.  We excluded hospitals with less than 45 DRG 296 
discharges in 1996, hospitals currently under investigation by the OIG, and hospitals in the State 
of Maryland (Maryland hospitals are not currently reimbursed under the Prospective Payment 
System). 
For the hospitals with atypical billing patterns, we determined a potential overpayment amount for 
1996.  We first calculated a per discharge overpayment amount.  We based this calculation on the 
recent DRG validation work done by the OIG.  We determined the difference between the DRG 
296 payment that was inappropriately billed and the payment for the DRG code that should have 
been billed.  For the hospitals identified, we then determined the number of DRG 296 discharges 
that exceeded the national average for all hospitals.  We multiplied these discharges by the 
estimated per discharge overpayment to determine the potential financial impact to the Medicare 
program. 
This inspection was conducted in accordance with the Quality Standards for Inspections issued 
by the Presidents Council on Integrity and Efficiency. 
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3  F I N D I N G S

SIXTY HOSPITALS HAD ATYPICALLY HIGH MEDICARE BILLINGS FOR DRG 
296. 
Compared to national figures, a relatively small number of hospitals had abnormally high 
discharges for patients with a nutritional and metabolic disorder.  For 60 hospitals, total DRG 296 
discharges more than doubled, from 1,972 in 1993 to 4,471 in 1996.  This represents an average 
increase of 32 percent a year.  Nationally, DRG 296 discharges nearly stayed unchanged from 
233,915 in 1993 to 233,592 in 1996. 
Some of the 60 hospitals exhibited unusually high increases in DRG 296 discharges from 1993 to 
1996.  For instance, one hospitals DRG 296 discharges tripled from 39 (out of 3,298 total 
discharges) in 1993 to 121 (out of 3,384 total discharges) in 1996.  Another hospitals DRG 296 
discharges increased from 8 (out of 418 total discharges) in 1994 to 40 (out of 573 total 
discharges) in 1995 -- a five-fold increase. 
These 60 hospitals also had atypically high proportions of DRG 296 discharges to total discharges 
as compared to the national average.  As illustrated in the chart below, for the 60 hospitals, the 
proportion of DRG 296 discharges to total discharges nearly doubled from 2.58 percent in 1993 
to 5.08 percent in 1996.  For all hospitals, this same proportion decreased from 2.10 percent in 
1993 to 1.99 percent in 1996, with an average decrease of 2 percent a year. 
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4  Between 1993 and 1996, the proportion of DRG 296 discharges to total discharges for the 60 
hospitals increased between 2 and 9 times.  For 15 percent of the hospitals (9 of 60), the 
proportion increased by a factor of 3 or more. 
The 60 hospitals were located in 24 States.  Twenty-six of the hospitals were concentrated in just 
5 States.  Six hospitals were in Texas and Kentucky, five in Alabama and Oklahoma, and 
Louisiana had four.  The remaining States had between one and three hospitals. 
THE QUESTIONABLE BILLING OF DRG 296 COULD HAVE A FINANCIAL IMPACT 
ON THE MEDICARE PROGRAM. 
For the 60 hospitals, the number of discharges for patients with a nutritional and metabolic 
disorder diagnosis exceeded national norms by 2,316 cases.  Using previous Office of Inspector 
General validation efforts, we calculated a difference of $514 between the DRG 296 payment that 
was inappropriately billed and the payment for the DRG code that should have been billed. 
Therefore, we estimate that potential overpayments could be as high as $1.2 million in 1996.  This 
$1.2 million overpayment represents 8 percent of the $14.4 million paid to these hospitals for 
DRG 296 in 1996. 
The true upcoding error rate can only be determined by undertaking a detailed claims review at 
each hospital.  Therefore, the potential overpayments at each hospital would vary depending on 
actual coding error rates. 
Proportion of DRG 296 Discharges to Total Discharges 
1993 to 1996 
6.00% 
5.50% 
5.00% 
4.50% 
4.00% 
3.50% 
3.00% 
2.50% 
2.00% 
1.50% 
1.00% 
0.50% 
0.00% 
1993  1994  1995  1996 
DRG 296 to Total  2.58%  3.13%  3.91%  5.08% 
(60 Hospitals) 
DRG 296 to Total  2.10%  1.98%  1.98%  1.99% 
(All Hospitals) 
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5  N E X T  S T E P S

As noted in the background, we previously recommended that the Health Care Financing 
Administration perform routine monitoring and analysis of hospital billing and clinical data to 
proactively identify aberrant patterns of upcoding.  The HCFA agreed with the recommendation 
and outlined an extensive program to respond to it.  We offer the information in this report as 
insight into another possible problem DRG for HCFA to consider when refining its plan.  We 
recognize that only record reviews by trained professionals will establish if incorrect coding has 
occurred at the 60 hospitals identified.  Meanwhile, we have referred the 60 hospitals to our 
Office of Investigations.  We look forward to continuing collaboration with HCFA on this matter. 
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6  A P P E N D I X  A

CLINICAL DATA ABSTRACTION CENTERS 1996 
VALIDATION WORK FOR DRG 296 
This table shows the results of the 1996 Clinical Data Abstraction Centers validation effort for 
DRG 296 (Nutritional & Miscellaneous Metabolic Disorders Age > 17 with Complications and 
Comorbidities).  Column one contains the appropriate DRGs for the 31 upcoded DRG 296 
discharges identified in the validation work. 
Number of  Percent of 
DRG  DRG  Times DRG  Total Times 
Codes  Weights  DRG Definitions 1  was Upcoded  DRGs were 
Upcoded 
182  0.7794  Esophagitis, Gastroenteritis & Miscellaneous Digestive  16  52% 
Disorders Age > 17 with Complications and 
Comorbidities 
449  0.7886  Poisoning and Toxic Effects of Drugs Age > 17 with  3  10% 
Complications and Comorbidities 
294  0.7579  Diabetes Age > 35  2  6% 
297  0.5353  Nutritional & Miscellaneous Metabolic Disorders Age  2  6% 
> 17 without Complications and Comorbidities 
463  0.7416  Signs & Symptoms with Complications and  2  6% 
Comorbidities 
125  0.8767  Circulatory Disorders Except Acute Myocardial  1  3% 
Infarction, with Cardiac Catheterization without 
Complex Diagnosis 
132  0.6861  Atherosclerosis with Complications and Comorbidities  1  3% 
141  0.7149  Syncope & Collapse with Complications and  1  3% 
Comorbidities 
243  0.7248  Medical Back Problems  1  3% 
321  0.6104  Kidney & Urinary Tract Infections Age > 17 without  1  3% 
Complications and Comorbidities 
434  0.7373  Alcohol/Drug Abuse or Dependence, Detoxification or  1  3% 
Other Symptomatic Treatment with Complications and 
Comorbidities 
Total  31  98% 2 
1	 These definitions were taken from the Diagnosis Related Groups Definitions Manual, version 15.0, as compiled 
by the company, 3M Health Information Systems. 
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A - 1  2  The total for this column does not equal 100 percent due to rounding. 
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A - 2
 APPENDIX B

OFFICE OF INSPECTOR GENERALS 
VALIDATION WORK FOR DRG 296 
This table shows the results of the Office of Inspector Generals (OIG) validation work for DRG 
296 (Nutritional & Miscellaneous Metabolic Disorders Age > 17).  Column one contains the 
appropriate DRGs for the 14 upcoded DRG 296 discharges found in the validation work. 
Number of  Percent of Total 
DRG  DRG  times DRG  Times DRGs 
Codes  Weights  DRG Definitions 1  was Upcoded  were upcoded 
182  0.7794  Esophagitis, Gastroenteritis & Miscellaneous  6  43% 
Digestive Disorders Age > 17 with Complications 
and Comorbidities 
297  0.5353  Nutritional & Miscellaneous Metabolic Disorders  4  29% 
Age > 17 without Complications and Comorbidities 
294  0.7579  Diabetes Age > 35  3  21% 
096  0.8390  Bronchitis & Asthma Age > 17 with Complications  1  7% 
and Comorbidities 
Total  14  100% 
1  These descriptions were taken from the Diagnosis Related Groups Definitions Manual, version 15.0, as 
compiled by the company, 3M Health Information Systems. 
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B - 1