DRG 154: STOMACH , ESOPHAGEAL

& DUODENAL PROCEDURES

RICHARD P. KUSSEROW 
INSPECTOR GENERAL 
OAI-12-88-01160  JULY1989  EXECUTIVE SUMMARY 
BACKGROUND 
Diagnosis related group (DRG) 154 pays for major, operating room procedures involving the 
upper gastrointestinal trct. It cares a high relative weight because it includes a varety of 
complex surgeries, 2.u876 in Fiscal Year (FY) 1987. Although DRG 154 
bils comprise only 
5% of prospective payment system discharges, the $381.4 millon Medicare paid for them 
amounts to 1.2% ofFY 1987 reimbursement The National DRG Validation Study suggested 
that DRG 154 might have high overpayments. This inspection confis this inference and 
quantifies the size of Medicare s losses to miscodng. 
FINDINGS 
Overal, 20.0 percent ofDRG 154 discharges should have grouped to a different DRG. 
This error rate exceeds the 18.6 percent for all DRGs. 
All DRG 154 assignment errors resulted in the hospitals overpaying themselves. This 
overpayment percentage signifcantly exceeds the 59.7 percent for all DRGs. 
$51.0 milion overpayment in DRG 154' s $381.4 
These errors caused a projected 

milion reimbursement durng FY 1987, a 13.4 percent rate. 
In nearly all errors, the medical records deparment assigned the wrong ICD-
numeric code to procedurs corrctly described by the physician on the Attestation 
Sheet In a few cases, it assigned incorrct numeric codes to patient diagnoses. 
Most of the discharges incorrectly coded as DRG 154 grouped to other DRGs in Major 
Diagnostic Category 06, the digestive system. In 
parcular, non-surgical 
gastrintestial hemorrhage (DRG 179), peptic ulcer (DRG 177), and gastroenteritis 
(DRG 182). 
The 1987 requirement that Fiscal Intermediares verify a sample open biopsy claims 
from operative report would detect less than one percent of DRG 154 assignment errors. 
RECOMMENDATIONS 
The Health Care Financing Admnistrtion 
(HCFA) should requir the peer review 
organizations (PROs) to furer educate hospital medical records deparents about the 
proper codes to use for upper gastrintestinal endoscopies and use of the surgical 
hierachy. 
The HCFA should dict the PROs to check a sample of futu DRG 154 bils for 
accurcy.  The HCFA agrees with fit recommendation and disagrees with the second recommendation. 
The Offce of Inspector General contiues to believe that full implementation of these recom
mendations would save $51.
0 millon annually.  ........ .. .. .. .. ...  ...  ....   .....    .....   . .......      .......      ...........          ...........          ...........          ..............             ..............             ..............             ................               ................               .....:..........               .................                ..................                 ..................                 ..................               ..................                 ...................              ..  ................  .               .. ................. .                .. ................. ..          '      .... ......... ......                 . .....................                     .......................                      ........................                      ........................                       .........................                        ..........................                         ...........................                          ...........................                          ...........................                          ...........................                          ...........................                          ...........................                      .    ..........................                      .    ..........................               .           ...........................                          ...........................                          ...........................                          ...........................                          ...........................                          ...........................                          ..........................                           ...........................           ...........
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TABLE OF CONTENTS 
EXECUTIVE SUMMARY 
INTRODUCTION 
Background 
PPS vulnerabilties 
PPS clais processing

DRG 154 .................................................

Methodology 
FINDINGS 
Sample charcteristics 
Assignment errors 
Dirction of errors 
Source of errors 
Reasons for errors 
Financial effects 
Corrct DRG assignments 
Clinical review results 
RECOMMENDATIONS 
Appendix A-I: DRG 154 discharges from al PPS hospitas. . 
Appendix A-2: DRG 154 sampling frame 
Appendix A-3: DRG 154 hospita demography 
Appendix A-4: DRG 154 hospital demography comparson 
Appendix A-5: DRG 154 patient demography 
Appendix A-6: DRG 154 patient demography comparson 
Appendix B-1: DRG 154 codg accuracy 
Appendix B-2: DRG 154 codg accuracy comparson. 
codg 
Appendix B-3: DRG 154  accuracy by patient demography 
Appendix C-l: DRG 154 overpayments by hospital demography 
Appendix C-2: DRG 154 overpayments comparson 
Appendix C-3: DRG 154 overpayments by patient demography 
Appendix D-l: DRG 154 hospital department making error  .......................  ..
. ..  ...   ...   ....    ....    ....    ......      ......      ......      ........        ........        ........        ........        ........        ........        ........        ........        .........         ..........          ............            ............            ............            ............            ............            ............            ............            ............            ............            .............             .............             .............
Appendix D-2: DRG 154 hospital deparment makng error comparson 
Appendix D-3: DRG 154 hospital deparment making error by patient demography 
Appendix E-l: DRG 154 codng error reasons 
Appendix E-2: DRG 154 codng error reasons by hospital demography 
Appendix E-3: DRG 154 coding error reasons comparson 
Appendi E-4: DRG 154 codng error reasons by patient demography 
Appendix F-l: DRG 154 corrcted relative weights 
Appendix F-2: DRG 154 corrcted reimbursement. . . . 
Appendix F-3: DRG 154 projected cost of errors 
Appendix G-l: Corrct MDC for discharges mis-assigned to DRG 154 
Appendix G-2: Correct DRG for discharges mis-assigned to DRG 154 
Appendix G-3: ICD- CM procedure codes for discharges mis-assigned to DRG 154 . . 
Appendix G-4: ICD- CM procedure codes for DRG 154 discharges 
Appendix G-5: DRG 154 errrs biling for an open biopsy 
Appendix H-l: DRG 154 clinical incidents. ; . . 
Appendix H-2: DRG 154 clinical incidents comparson  INTRODUCTION 
BACKGROUND 
On October 1, 1983, the Health Care Financing Administration (HCFA) began im
plementing a new system of payment for inpatient hospital servces under the Medicare 
program. The new prospective payment system (PPS) replaced the cost-based reimburse
ment system. Congress mandated this change because of rapid growth in health care 
costs, particularly, the rapid increase in payments for inpatient expenses under Medicare. 
Under PPS, hospitals received a pre-established payment for each discharge, based upon 
the diagnosis related group (DRG) to which the discharge 
groups. The PPS classified dis
charges into clinically coherent groups which use similar amounts of hospital resources, 
based on variables such as: diagnosis; evaluation and treatment procedures; and patient 
age, sex, and discharge status. Each of the 473 DRGs had an associated relative weight, 
which represented the average cost for hospital care provided to patients with diagnoses 
grouping to that DRG as a proportion of the cost of the average patient. The hospital 
received this payment independent of the actual length of hospitalization or cost of treat
ment for the individual patient. The hospital retained any surplus from patients consum
than the expected amount of resources, and suffered losses on those patients 
ing les 
consuming more.

The shift from cost-based, retrospective reimbursement to prospective payment con
stituted one of the most dramatic changes in health care reimbursement since the crea
tion of Medicare. A fixed payment per discharge induced hospitals to implement 
economies and reduce unnecessary servces. The total payments to the hospitals 
provided the same financial resources for patient care.  , PPS reversed the finan
In effect
cial incentives for hospitals. Where the cost-reimbursement system rewarded longer 
hospital stays and more costly treatments, PPS rewarded earlier discharges and less costly 
procedures. One of the first consequences of the new payment system came as a drop in 
average length of hospital stay for Medicare patients. 
PPS vulnerabilties 
The advent of PPS also created new opportunities for manipulation or "gaming
" to in
crease hospital revenues from Medicare patients. To protect the integrity of PPS and 
maintain quality of care Congress established peer review organzations (PROs) to 
monitor hospital activities. 
In addition, the Office of the Inspector General (OIG) conducted the National DRG 
Validation Study to survey the general accuracy of DRG assignment and quality of care 
performed by hospitals under PPS. The National DRG Validation Study examined as
signment accuracy in over 7000 medical records. The OIG established that PPS assign ment errors resulted in $300 milion in overpayments to hospitals and that the majority of 
overpayments could be traced to assignment errors affecting a small number of DRGs. 
This report comprises one of a series examning assignent accuracy of one ofthe DRGs 
identified as having the highest impact on overpayments under PPS and the greatest 
potential for cost recovery. 
The PPS may create financial incentives for hospitals to manpulate or "game" the pay
ment system in order to receive maxmum Medicare reimbursements. The PPS gaming 
takes two principal forms. "Optimiation" strategies adhere to coding rules, but max
mize hospital reimbursements by selecting the most expensive among viable alternative 
principal diagnoses or adding more secondary diagnoses. PPS permts optimiation. 
DRG "creep" results from coding practices which do not conform to coding rules. 
Sources of DRG creep include: 
Mis-specification of the principal diagnosis, secondary diagnoses, or procedures by 
the attending physician. The Uniform Hospital Discharge Data Set defines the 
principal diagnosis as "that condition established after study to be chiefly 
responsible for occasioning the admission of the patient to the hospital for care. 
Miscoding by the hospital's medical records department when assigning codes to 
the diseases or procedures attested to by the attending physician. 
Resequencing of the order of the narrative diagnoses to substitute a secondar 
diagnosis for the correct principal diagnosis.

PPS claims processing 
Under PPS, the hospital files a claim for Medicare reimbursement upon discharging the 
covered patient. The attending physician attests to the principal diagnosis which caused 
the patient's admission to the hospital , secondar diagnoses, and procedures (diagnostic 
and therapeutic) provided. The medical records department 
tranlates the narrative diag
noses of the physician s attestation statement into numeric codes from the International 
Classification of Diseases, Ninth Revision, Clinical Modification (ICD- CM), and 
prepares a claim. Fiscal intermediary (FI) organizations, working under contract with 
HCFA, enter the hospital's codes into the GROUPER computer program which assigns 
the appropriate DRG for reimbursement. 
Multiplying the "relative weight" for each DRG by a standardized amount produces the 
dollar reimbursement for the discharge, as modified by certain hospital-specific factors. 
The relative weight for a DRG reflects the average cost of its treatment compared to the 
average cost of treatment of all Medicare discharges. In Fiscal Year (FY) 1985, the stand
ardized amount for a relative weight of 1.0000 totaled $2985 for urban hospitals and 
$2381 for rural hospitals. The relative weight of each DRG varies above or below 1. 0000 
according to the average amount of hospital resources used by patients in that diagnostic  ----?--+    
group. The higher the relative weight, the greater the reimbursement. Mis-assignment 
of the ICD- CM categories, or erroneous assignment or sequencing of patient diag
noses, can therefore have significant financial implications. 
DRG 154 
This study examines erroneous assignment and gaming in a single DRG: 154 - stomach 
esophageal, and duodenal procedures. Being a surgical DRG, assignent to 
154 re
quires both upon (1).a principal diagnosis of upper gastrointestinal disease and (2) a re
lated operating room procedure. Where multiple procedures occur during 
hospitalization, the "surgical hierarchy" selects the most resource intensive one. Proce
dures grouping to DRG 154 include removal of the stomach or small intestine, severing 
the vagal nerve to the stomach, surgical repair of the esophagus, and similar major 
It does not include non-surgical procedures such as 
surgery to the gastrointestinal tract. 
endoscopy through the mouth to examne the upper gastrointestinal tract. 
(all PPS hospitals) 
Figure  1:  DRG  154 
Relative Weight

Discharges (10K) 
Charges ($100 M) 
Payment ($100 M) 
Mean Payment  ($1 
1984  1985  1986  1987 
Fiscal 
In the National DRG Validation Study, DRG 154 appeared to have a high rate of mis-as-
signment. Although Medicare pays only about 40,000 such bils annually, they account 
for a disproportionate 1.2 percent of prospective payment dollars. The OIG therefore in
itiated this inspection to verify this preliminary impression. DRG 154 appeared par
ticularly vulnerable to mis-assignment and manpulation due to its high relative weight 
(2.6621 in FY 1985) and concomitant average reimbursement ($8 198). In addition 
DRG 154 carried the highest weight of any DRG in the surgical hierarchy of Major Diag
nostic Category (MDC) 06, gastrointestinal diseases. (Appendix A The DRG 154 excludes most procedures that do not involve cutting into the abdominal 
cavity. This inpection examined whether miscoding caused less invasive procedures to 
erroneously group to DRG 154. Since October 1987, the HCFA has required that hospi
tals submit operating room reports on bils for open biopsies. The FIs verify 10 percent 
of claims for accuracy of the procedure coded (Le., whether an open biopsy actually oc
curred). This requirement checks the accuracy of some DRG 154 bils. 
METHODOLOGY 
This study examnes DRG 154 discharges drawn from a sampling frame originally 
designed for the National DRG Validation Study. It used a stratified two-stage sampling 
design based on hospitals to select medical records for review. The first stage used 
simple random sampling without replacement to select up to 80 acute care, prospective 
payment hospitals from each of three strata based on bed size: less than 100 beds 
(small), 100 to 299 beds (medium), and 300 or more beds (large). The second stage of 
the design employed systematic random sampling to select DRG  period 
154 bils for the 
October 1, 1984 to March 31, 1985 from the 239 hospitals selected in the first stage. 
Sample Frame 
Figure  2: 
-c 100 beds 
100-299 beds 
300 + beds 
DRG 154  All DRGs 
The OIG contracted with the Health Data Institute of Lexington, MA to reabstract the 
entire sample of records. Upon receipt, the contractor "blinded" the ICD- CM codes 
by covering them, and assigned an identification number to each record. An Accredited 
Record Technician or Registered Record Administrator proficient in ICD- CM coding 
reviewed the entire record to substantiate the principal diagnosis, other diagnoses, and 
procedures indicated by the attending physician in the narrative attestation form. Any 
records which did not support the assigned DRG classification went to physician 
reviewers. The physician reviewers designated the correct UHDDS principal diagnosis 
additional diagnoses, and procedures substantiated by the patient records. The  GROUPER computer program processed the reabstracted ICD- CM codes to deter
mine correct DRGs. The final report on the National DRG Validation Study presents a 
full discussion of the record review methodology (available from OIG Public Mfairs).  FINDINGS 
Sample characteristics 
In FY 1985,  433 of the 8.3 millon prospective payment discharges (0.4 percent) 
grouped to DRG 154. The National DRG Validation Study established that large and 
medium sized hospitals submit a disproportionate share of DRG 154 bils. Smaller hospi
tals may have lacked the facilities to perform the major surgery necessar to group to 
DRG 154. The bed size trend for DRG 154 differed signficantly different from the dis
tribution for all DRGs (Chi-square 4181.6, 2 df, P or 0.0001). Discharges from 239 hospi
tals in the sampling frame exhibited the same proportions as the underlying population. 
They biled for 222 396 discharges of which 1 162 came from DRG 154. (Appendix A-
Hospital Demography 
Figure  3 : 
Yes
DRG 154: Urban 
All DRGs: Urban  B_;I 
DRG 154: Teaching 
All DRGs: Teaching 
DRG 154: Profit 
All DRGs: Profit 
Percent of discharges 
The two-stage sample design permitted calculation of separate results for Medicare 
beneficiaries (the probabilty of something happening to a person) and hospitals (the 
odds of an event at a particular hospital). The appendices, tables, and chars therefore 
report individual totals weighted by both discharges and hospitals. When weighted by dis
charges to approximate the underlying population, DRG 154 bils principally came from 
urban, nonteaching, and nonprofit hospitals. (Appendix A-3) DRG 
154 therefore paral
leled the distribution of all PPS discharges, except for having a significantly higher 
proportion of urban discharges even when controllng for bed size (Mantel-
Haenszel Chi-
square 3.96, df 1, P or 0. 05). (Appendix A-
Discharge weighted and controllng for bed size, the DRG 154 sample did not differ sig
nificantly from all DRGs by age (t test 0.57, P = 0.35) or sex (Mantel-Haenszell.4, 1 df 
P = 0.23). (Appendix A-5) However, DRG 154 discharges did have significantly higher  Table I: Patient Demography 
DRG 154  National DRG  Medicare 
Validation 
Age (year)  74.4  73.  not avaible 
Sex (% male)  38.  46.  42. 
LOS (days)  16. 
29 
Payment ($)  urban 
2381  rural 
Mortlit (%)  not available 
050  3 millon 
lengths of stay (t test 6.  , P) and payments (t test 269.4, P) than the National DRG 
Validation Study. .The samples also had the same mortalty rate (Mantel-Haenszel1.2
, 1 
, P = 0.28). (Appendix A-
Assignment errors 
Reviewers determned that 20.0 percent of discharges should not have grouped to DRG 
154. (Appendix B-1). Medium sized hospitals had the' highest rate of assignent errors 
but did not signficantly exceed the rates for either other sizes of hospitals in this sample 
(Chi-square 3.0, 2 df, P = 0.22), or for al DRGs from medium sized hospitals (Chi-square 
, 1 df, P = 0.08). DRG 154 assignent errors occurred more often in discharges from 
urban (Mantel-Haenszel1.1, 1 df, P = 0.30), teaching (Mantel-HaenszeI2.  , 1 df 
P = 0.09), and for-profit hospitals (Mantel-Haenszel 0.  , 1 df, P = 0.70); but not at statisti
cally significant rates. (Appendix B-
Examnation of DRG 154 assignment errors by patient demography, demonstrates that 
among discharges assigned to DRG 154, those assigned incorrectly had the same average 
Coding Accurac 
Percent  Figure  4: 
DRG 154 
All DRGs 
Be size  age; but a substantially lower percentage of males, shorter average lengths of stay, and 
lower rate of patient mortality. No clear trend association existed between payment, in
correct assignent, and bed size. (Appendix B-
Direction of errors 
All of the errors in this sample resulted in overpayments to hospitals. Hospitals should 
have coded and biled these discharges to a DRG with a lower relative weight than DRG 
154, which had a relative weight in FY 1985 of 2.6621. (Appendix C-l) The combination 
of a 20.0 percent error rate and all errors increasing the reimbursement gave DRG 154 
an effective overpayment percentage of 20.0, significantly higher than the 11.1 percent of 
the National DRG Validation Study (Chi-square 4. 13, df 1, Pc: 0.05). (Appendix C-
Direction of Coding E"ors
Percent  Figure  5: 
DRG 154 
DRG 154 
All DRGs 
All DRGs 
.. 100  100-299  300+ 
Bed size 
Appendix C- , which tabulates the direction of DRG 154 errors by hospital demography, 
shows that half the instances of overpayment came from mid-sized hospitals, largely be
cause they had the highest rate of erroneous bils. (Appendix C-
Source of errors 
All DRG 154 errors derived from errors in coding as opposed to errors in biling after 
correct coding. In this inspection, medical records deparments incorrectly coded the 
records as DRG 154, and the hospital biled accordingly. No errors resulted from hospi
tals incorrectly billing a record which had the correct medical codes. (Appendix D Reasons for errors 
Miscoding errors by the hospital medical records department accounted for 81.2 percent 
of the errors in DRG 154. Indeed, 62.5 percent of errors resulted from the medical 
records department assigning the wrong code to a procedure correctly specified in the At
testation Sheet. Another 18.8 percent of errors occurred when the deparment selected 
the wrong ICD- CM codes for the correct narrative principal or secondary diagnoses. 
Only 12.5 percent of errors derived from physician mis-specifyng the principal diag
nosis. (Appendix E-l) In contrast, the National DRG Validation Study traced the 
majority of its errors to mis-specification by the attending physician. (Appendix E-
In discharges miscoded by the hospital, patients tended to have a higher average age 
lower percent of males, and to shorter lengths of stay than discharges in 
which physician 
made narrative errors. In addition to longer hospital stays, the latter had higher average 
reimbursements. (Appendix E-
Reasons for Errors 
Figure  6: 
1M Misspecification 
Miscoding 
Resequenciflg 
Other 
DRG 154  All DRGs 
Financial effects 
Weighted by discharges, overpayments totaled 14.3 percent of total dollar reimburse
ment. Mter reabstraction, the average relative weight for DRG 154 discharges in this 
sample decreased from 2.6621 to 2.2823, and the total relative weight decreased from 
l) 
66.6625 to 57.0575. (Appendix F- Based on the hypothetical, national, standardized 
amounts for reimbursement during FY 1985 ($2985 urban and $2381 rural), the change 
in relative weight for discharges in this sample resulted in average overpayments of $965 
to small hospitals, $1541 to medium sized hospitals, and $672 to large hospitals on each 
discharge paid as DRG 154. The bulk of these overpayments went to mid-sized hospi
tals, which also had the highest rate of coding errors. (Appendix F-2)  Projecting the 14.3% overpayment rate to the entire Medicare population, miscoding of 
DRG 154 resulted in an estimated $42. 1 millon of excessive payments in FY 1985 and in
creased to $51.0 millon in FY 1987. Extrapolating the rising four year trend for DRG 
154 reimbursement implies overpayments of $75.6 millon by FY 1990. (Appendix F-
Overpayments Projected
Figure  7: 
$ milion 
Ovymen 
198  198  198  1987  198  198  199 
Correct DRG assignments 
After reabstraction by reviewers, 93.8 percent of errors grouped to another DRG in 
MDC 06, diseases and disorders of the digestive system. Ths recoding assigned 18.8 per
cent of these discharges to lower weighted surgical DRGs in MDC 06 and 75. 0 percent to 
car 
non-surgical (or medical) DRGs in MDC 06. . Medical DRGs usually  lower relative 
weights than more resource intensive, surgical conditions. (Appendix G-
Of the coding errors, 62.5 percent grouped to only three nonsurgical DRGs: 174 
(gastrointestinal hemorrhage), 177 (uncomplicated peptic ulcer), and 182 (esophagitis, 
gastroenteritis, and miscellaneous digestive disorders). (Appendix G-2). In 43.8 percent 
of errors, hospitals biled for varous operating room procedures while actually perform
ing endoscopy of small intestine (ICD- CM 45. 13), a non-operating room procedure car
ryng a lower relative weight. (Appendix G-3) Analyzed at the level of narrative 
diagnoses and procedures, other erroneous bils pertained to procedures elsewhere in 
the gastrointestinal tract or did not relate to the almentary canal at all. Viewed in con
junction with the high rate of errors due to miscoding of correct narrative diagnoses im
plies coder confsion about the ICD- CM treatment of esophagogastroduodenoscopy 
and instrumentation. (Appendix G-
The HCFA's 1987 requirement that operating room reports accompany open biopsy bils 
could have detected only 6.3 percent of the DRG 154 assignment errors. (Appendix G-
The other DRG 154 bils listed exclusively ICD- CM procedure codes not pertinent to 
open biopsies. Since the Fls check only 10 percent of open biopsy claims, this proceSs 
would correct less than one percent of the errors of the tye, found during this inspection. 
Turning to ICD- CM codes for discharges correctly biled to DRG 154, the majority in volved surgical removal of all or a portion of the stomach. Major surgeries of the 
esophagus, vagus nerve, and peptic ulcer also occurred frequently. Herna repair and 
small intestine procedures appeared only rarely in the biling codes. 
Clinical review results

Medical reviewers judged only 3.2 percent of discharge weighted cases to be unnecessary 
an admission in which the care received by the patient was either not needed or did not 
require the use of the inpatient setting ). They occurred in mid-sized and large hospitals. 
DRG 154 included no premature discharges. (Appendix H-
Clinical Incidence 
Figure  8: 
Perc 
1M DRG 89 
All DRGs 
Unnee admissions  Poo qualit  Premature dischares 
Weighted to represent discharges, only 3.3 percent of this sample, received "quality of 
care not meeting professional standards." This rate is lower than the 5.5 percent quality 
problems in the National DRG Validation Study. (Appendi H RECOMMENDATIONS

The HCF A should require the PROs to fuher educate hospital medical records 
departments about the proper codes to use for upper gastrointestinal endoscopies 
and use of the surgical hierarchy. 
The HCF A should direct the PROs to check a sample of future DRG 154 
bils for 
accuracy. 
The HCFA agrees with first recommendation and disagrees with the second recommen
dation. The Offce of Inspector General continues to believe that full implementation of 
these recommendations would save $51.0 millon anually.  1: DRG 154 dischar  es from all PPS hos  itals 
endix 
Fiscal Year  1984  1985  1986  1987 
Relative weight  6901  6621  6726  6876 
Number of discharges  28, 272  38,433  877  255 
Total charges ($000)  314 127  596, 540  703,995  759, 069 
Total reimbursement ($000)  216, 521  315, 081  367 303  381 445 
Average reimbursement ($)  659  198  566  819 
Aependix A- sam  frame 
2: DRG 154 
Number of discharges  Bed size 
oe100  100-299  300+  Total 
Medicare population  023  609  21,801  38,433 
Sample hospitals  318  790  162 
Sampled 
Sampling fraction (%)  (46.  (7.  (3.  (6. 
Aependix A- demo 
3: DRG 154 hospital 
Number (percent  Bed size  Wei  hted ercenta 
ditrbution)  -:100  100-299  300+  Tota  Sample Discharge Hospita 
Urban  10 (40.  19 (76.  23 (92.  (69.  (83.  (60. 
Rural  15 (60.  6 (24.  2 (8.  (30.  (16.  (40. 
Teaching  3 (12.  8 (32.  13 (52.  (32.  (40.  (20. 
Nonteaching  22 (88.  17 (68.  12 (48.  (68.  (57.  (75. 
Profit  3 (12.  3 (12.  (8.  (5.  (10. 
Nonprofit  22 (88.  22 (88.  25(100.  (92.  (94.  (89. 
Total  25(100.  25(100.  25(100.  (100.  (100.  (100.  4: DRG 154 hos demo  com  arison
endix  ital 
Percent  Bed size  Wei  ercenta
hted 
distribution  c: 00  100-299  300+  Sample  Discharge Hospital 
Urban  DRG 154  40.  76.  92.  69.  83.  60. 
All DRGs  19.  70.  94.  62.  71.  48. 
Rural  DRG 154  60.  24.  30.  16.  40. 
All DRGs  80.  29.  38.  28.  52. 
Teaching  DRG 154  12.  32.  52.  32.  43.  20. 
All DRGs  18.  55.  25.  31.  16. 
Nonteaching DRG 154  88.  68.  48.  68.  57.  75. 
All DRGs  97.4  81.  44.  74.  68.  83. 
Profit  DRG 154  12.  12.  10. 
All DRGs  17.  10. 
Nonprofit  DRG 154  88.  88.  100.  92.  94.  89. 
All DRGs  90.  82.  97.  90.  90.  89. 
Al!endix A- demo 
5: DRG 154 patient 
Bed size  Wei  hted avera 
.:100  100-299  300+  Sample  Discharge  Hospital 
Age (years)  75.  74.  73.  74.  74.  75. 
Sex (% male)  40.  36.  40.  38.  38. 
LOS (days)  13.  13.  20.  15.  17.  14. 
Payment ($)  6286  7729  8368  7461  8015  7085 
Mortality (%)  12.  12.  9.4  demo  comparison 
endix  6: DRG 154 patient  hy 
Bed size  Wei  hted avera 
c:100  100-299  300+  Sample  Discharge  Hospital 
Age (years)  DRG 154  75.  74.  73.  74.  74.  75. 
All DRGs  76.  74.  72.  74.  73.  74. 
Sex (% male) DRG 154  40.  36.  40.  38.  38. 
All DRGs  43.  45.4  48.  45.  46.  44. 
LOS (days)  DRG 154  13.  13.  20.  15.4  17.  14. 
All DRGs  7.4 
Payment ($)  DRG 154  6286  7729  8368  7461  8015  7085 
All DRGs  1849  2923  3807  2860  3115  2508 
Mortality (%)  DRG 154  12.  12.  9.4 
All DRGs  6.4  ;j. 
1: DRG 154 codin accurac 
endix 
Number of errors  Bed size  Wei  hted avera 
(Rate)  -:100  100-299  300+  Tota  Sample Discharge Hospita 
Urban  2 (20.  7 (36.  3 (13.  (23.  (22.4)  (24.4)
Rural  3 (20.  1 (16.  0 ( 0.  (17.4)  ( 7.4)  (15. 
Teaching  2 (66.  5 (62.  (15.4)  (37.  (36.  (57.
Nonteaching  1 ( 8. 
3 (13.  3 (17.  (13.  (12.  (14. 
Profit  2 (66.  1 (33.  0 ( 0.  (50.  (16.  (45.
Nonprofit  3 (13.  7 (31.  3 (12.  (18.  (19.  (19. 
Total  5 (20.  8 (32.  3 (12.  (21.  (20.  (22. 
codin  accuracy comparison 
ependix B-2: DRG 154 
Error rate  Bed size  Wei  hted avera 
-:100  100-299  300+  Sample  Discharge  Hospital 
Urban  DRG 154  20.  36.  13.  22.4  24. 
All DRGs  22.  19.  16.  18.  18.  20. 
Rural  DRG 154  20.  16.  17.  7.4  15. 
All DRGs  23.  16.  22.  21.  20.  21. 
Teaching  DRG 154  66.  62.  15.  37.  36.  57. 
All DRGs  20.  20.  15.  17.4  18.  19. 
Nonteaching DRG 154  13.  17.  13.  12.  14. 
All DRGs  23.  17.  17.  20.  18.  20. 
Profit  DRG 154  66.  33.  50.  16.  45. 
All DRGs  23.  18.  18.  20.  19.  21. 
Nonprofit  DRG 154  13.  31.  12.  18.  19.  19. 
All DRGs  23.  18.  16.  19.4  18.  20. 
Total  DRG 154  20.  32.  12.  21.  20.  22. 
All DRGs  23.  18.  16.  19.  18.  20.  ((%$)) 
demo9!hy 
3: DRG 154 coding accuracy by patient 
endix 
Bed size  Wei  hted avera 
..100  100-299  300+  Sample  Discharge  Hospital 
Age  Correct  76.  74.  73.  74.  74.  75.4 
(years)  Incorrect  71.  75.  73.  73.  74.  73. 
Sex  Correct  40.  41.  45.  42.4  43.  41. 
(% male)  Incorrect  40.  25.  25.  11.  28. 
LOS  Correct  15.  14.  21.  17.4  18.  16. 
(days)  Incorrect  10.4 
Payment  Correct  6144  7893  8535  7539  8164  7092 
Incorrect  6855  7382  7147  7174  7221  7073 
Mortality  Correct  15.  13.  11.  10.  1 1. 
Incorrect  demo9.hy
over  by hospital 
endix  C-1: DRG 154  ments 
Number  Bed size  Wei  hted avera 
(percent of errors)  ..100  100-299  300+  Tota  Sample Discharge Hospita 
Urban  2 (100.  7 (100.  3 (100.  (100.  (100.  (100. 
Rural  3 (100.  1 (100.  (100.  (43.  (84. 
Teaching  2 (100.  5 (100.  2 (100.  (100.  (100.  (100. 
Nonteaching  3 (100.  3 (100.  1 (100.  (100.  (100.  (100. 
Profit  2 (100.  1 (100.  (100.  (43.  (84. 
Nonprofit  3 (100.  7 (100.  3 (100.  (100.  (100.  (100. 
Total  5 (100.  8 (100.  3 (100.  (100.  (100.  (100. 
2: DRG 154 overpayments comparison
endix 
Percent of  Bed size  Wei  hted avera 
errors  -c100  100-299  300+  Sample  Discharge  Hospital 
Urban  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  53.  60.4  57.  58.  57.  56. 
Rural  DRG 154  100.  100.  100.  43.  84. 
All DRGs  66.  57.  65.  64.  62.  63. 
Teaching  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  66.  59.  56.  57.  59.  62. 
Non- DRG 154  100.  100.  100.  100.  100.  100. 
teaching  All DRGs  64.  59.  59.  61.  60.  61. 
Profit  DRG 154  100.  100.  100.  43.  84. 
All DRGs  68.  55.  63.  60.  61.  63. 
Nonprofit  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  63.  60.  57.  60.  59.  61. 
Total  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  64.  59.  57.  60.  59.  61.  (($%)) 
c-3: DRG 154  demo 
endix  overpayments buatient 
Bed size  Wei  hted avera 
.:100  100-299  300+  Sample  Discharge  Hospital 
Age  Underpaid 
(years)  Overpaid  71.  75.  73.  73.  74.  73. 
Sex  Underpaid 
(% male)  Overpaid  40.  25.  25.  11.  28. 
LOS  Underpaid 
(days)  Overpaid  4.4  10.4 
Payment  Underpaid 
Overpaid  6856  7382  7147  7174  7221  7075 
Mortality  Underpaid 
Overpaid  Aependix D-1: DRG 154 hospital department making error 
Coding  Bed size  Wei  hted avera 
deparent 
0:100  100-299  300+  Total  Sample Discharge Hospita 
errors (PercentJ 
Urban  2(100.  7 (100.  3 (100.  (100.  (100.  (100. 
Rural  3(100.  1 (100.  0 (100.  (100.  (100.  (100. 
Teaching  2(100.  5 (100.  2 (100.  (100.  (100.  (100. 
Non- 3(100.  3 (100.  1 (100.  (100.  (100.  (100.
teaching 
Profit  2(100.  1 (100.  0 (100.  (100.  (100.  (100. 
Nonprofit  3(100.  7 (100.  3 (100.  (100.  (100.  (100. 
Total  5(100.  8 (100.  3 (100.  (100.  (100.  (100. 
100%  no billing departent e"ors. 
2: DRG 154 hos  ital de  artment makin  error com  arison 
endix 
Percent of  Bed size  Wei  hted avera 
errors  100  100-299  300+  Sample  Discharge  Hospital 
Urban  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  89.  88.  90.  89.  89.  89. 
Rural  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  94.  95.  90.  94.  93.  94. 
Teaching  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  91.  92.  89.  90.  90.  91. 
Non- DRG 154  100.  100.  100.  100.  100.  100. 
teaching  All DRGs  93.  90.  92.  92.  91.  92. 
Profit  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  86.  92.4  81.  89.  86.  87.4 
Nonprofit  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  94.  90.  90.  92.  91.  92. 
Total  DRG 154  100.  100.  100.  100.  100.  100. 
All DRGs  93.  90.  90.  91.  91.  92.  (($%)) 
Appendix D-3: DRG 154 hospital department making error by patient 
demo 
Bed size  Wei  hted avera 
c:100  1 00-299  300+  Sample  Discharge  Hospital 
Age  Biling 
(years)  Coding  71.4  75.  73.  73.  74.  73. 
Sex  Biling 
(% male)  Coding  40.  25.  25.  11.  28. 
LOS  Biling 
(days)  Coding  4.4  10. 
Payment  Billng 
Coding  6856  7382  7147  7174  7221  7074 
rtality  Billng 
Coding  1: DRG 154 coding error reasons
pendix 
Bed size
Number  c: 09  100-299  300+  Total  (Percent) 
Mis-specification  (12. 
Principal diagnosis 
Miscoding  (12. 
Principal diagnosis  ( 6. 
Secondar diagnosis  (62. 
Procedure  ( 6. 
Other 
(100. 
Total 
Other 
Miscoding 
Mis-specification 
Number 
(Percent) 
(0.  (80.  (20.
c:1 00 beds  (75.  (0. 
(25.  (0. 
100-299 beds  (0.  (100. 
300+ beds 
(0. 
(83. 
(16. 
Urban  (0.  (75.  (25. 
Rural 
(0. 
(77. 
(22.  (7. 
Teaching  (0.  (85. 
Nonteaching 
(0. 
(0.  (100. 
(7. 
Profit  (76. 
(15.4) 
Nonprofit 
(6. 
(81. 
(12. 
Total  error reasons comparison 
3: DRG 154 coding 
gpendix E-
Wei  hted avera 
Bed size 
Percent of errors  .:100  100-299  300+  Sample  Discharge  Hospital
25.  12. 
Mis-specification  DRG 154  49.  44.  49.4  48.  47.  48. 
All DRGs 
Miscoding  DRG 154  8100..   7154..   10101.. 4  8111..   8192.. 4  8111..  
All DRGs 
0 . 
Resequencing  DRG 154 31.  24.  24.  27.  25.  28. 
All DRGs 
10. 
Other  DRG 154  20.  15.  14.  12.  13.  11. 
All DRGs 
codin 
endix E-4: DRG 154  error reasons

Other 
Mis-specification  Miscoding 
76.  67. 
Age (years)  59. 
23.
Sex (% male)  50. 
LOS (days)  17.  6938  6107 
9235 
Payment ($) 
Mortality (%)  Appendix F-1: DRG 154 corrected relative weights 
Bed size 
Relative  .c100  100-299  300+  Average 
weight 
Avera  6621  6621  6621  6621 
Paid  2942  1194  4333  2823 
Corrected  3679  5427  2288  3798 
Difference 
Total  66.5525  66.5525  66.5525  66.5525 
PCaoirdr ected  57.31595705   5123..95865705   60.87322050   579..04597550  
Diference 
corrected reimbursement 
2: DRG 154 
endix 
Bed size 
.c100  100-299  300+  Average
Avera  982  560  818  453 
Paid  017  019  146  389 
Corrected  672  063 
965  541 
Difference 
Total  174,541  189,012  195,443  186,318 
Paid  150,419  150,480  178,646  159,737 
Corrected  24,121  38,532  16,798  26,582 
Difference 
(13.  (20.4)  (8.  (13.4 ) 
Overpayment 
rate (%) 
Discharge weighted.  cost of errors
A2pendix F-
3: DRG 154  jected 
Fiscal Year  Reimbursement  Overpayment 
($ milion)  ($ milion) 
1984  216.  28. 
1985  315.  42. 
1986  367.  49. 
1987  381.  51. 
1988 est.  456.  61.
1989 est.  511.  68. 
1990 est.  566.  75. 
percent of reimbursement.
Overpayment calculated 
 as 13.4

Estimates based on linear regression.  mis-assi ned to DRG 154 
endix G- es 
1 : Correct MDC for dischar 
Bed size 
Number  ..100  100-299  300+  Total  (Percent) 
( 93. 
MDC 06: Digestive System  ( 6. 
MDC 20: Alcohol and Drugs 
(100. 
Total 
dlscha  es mis-assi  ned to DRG 154 
2: Correc DRG for 
ndlX G-
Bed size 
Number  ..100  100-299  300+  Total  (Percent) 
( 18. 
174: Gastrointestinal hemorrhage  ( 12. 
177: Uncomplicated peptic ulcer  ( 31. 
182: Esophagitis. gastroenteritis, 
& miscellaneous digestive disorders 
( 62. 
Subtotal  ( 37. 
Other DRGs  (100. 
Total 
3: ICD-9-CM procedure codes for discharges mis-assigned 
Appendix G-
to DRG 154 
Number  (percent) 
( 30. 
ESophagoga  roduodenOscopy 
Esophageal biopsy 
( 47. 
Brush biopsy 
Colonoscopy 
Colon excision 
Trans-abdominal endoscopy 
Incisional hernia 
psychiatric drug treatment 
(100. 
Total  4: ICD- CM procedure codes for DRG 
endix  154 discharges 
Number  (Percent) 
Esophageal surgery 
( 15. 
Gastrectomy 
( 51. 
Vagotomy 
( 14. 
Ulcer surgery 
( 12. 
Small intestine surgery 
Herniorrhaphy 
Total  (100. 
bilin  bio 
endix  G-5: DRG 154 errors  for an open 
Number  (Percent) 
Open biopsy claimed 
No open biopsy claimed 
( 93. 
Total  (100.  incidents 
1: DRG 154 clinical 
endix 
Wei  hted avera 
Bed size 
Number  Tota  Sample Discharge Hospita 
100-299  300+ 
(Rate)  '" 1 00 
Uadnmniescseiossnasr y  (0.  (4.  (4.  (2.  (3.  (1. 
Poor quality  (4.  (0.4)  (4. 
(8.  (0.  (0. 
of care 
Premature  (0.  (0.  (0. 
discharges  (0.  (0.  (0. 
incidents com arison 
2: DRG 154 clinical 
endix 
Wei  hted avera 
Bed size 
Rate  oe100  100-299  300+  Sample  Discharge  Hospital
Unnecessary  CRG 154  10.  10.  11. 
12.  10.
admissions  All CRGs
0.4 
Poor quality  CRG 154 
11.4
of care  All CRGs
Premature  CRG 154  0.4  1.4 
discharge  All CRGs