. (
!, : " ...
..  ;;. -. 
DRG 79: RESPIRATORY INFECTION 
t"VICES. 
'0 
i"d3a 
OFFICE OF INSPECTOR GENERAL 
AN 
OFFICE OF ANALYSIS  INSPECTIONS 
OAI-12-8801190  JULY 1989  , ,

OFFICE OF INSPECTOR GENERAL 
The mission of the Offce of Inspetor Genera (OIG) is to promote the effciency, effective- , 
ness, and integrty of progrs in the United States Deparent of Health and Human Ser
vices (HS). It does this by developing methods to detet and prevent fraud, waste, and 
abuse. Crate by statute in 1976, the Inspetor General keeps both the Seceta and the Con
gress fully and curently inormed about programs or management problems and reommends 
corrtive action. The OIG perform its mission by conductig audits, investigations, and in
spections with approxiately 1,200 sta strategically located around the countr. 
OFFICE OF ANALYSIS AND INSPECTIONS 
Ths repon is prouced by the Offce of Analysis and Inspections (OAl, one of the thee 
with 
the OIG. The other two 
major offces  ar the Offce of Audit and the Offce ofInvesti
. gations. The OAI conducts inspections which are"  to de
tyicaly, shon-term studies designed 
progr 
. terme  effective!less, effciency, and vulerabilty to frud or abuse. ' 
This inspection was conducted to analyze the charcteristics of discharges paid as DRG79. 
The repon was prepared by BOTEC Analysis of Cabridge, MA under contract HH-l00-88-
0019 and the Offce of Analysis and Inspections, Health Cae Branch. The followig people 
pancipated in this project. 
David Stone, M.A., BOTEC Analysis

Marcia Meyers, M.P.A., BOTEC Analysis

Mark Kleiman, Ph.D, BOTEC Analysis

Jeremy Schutte, BOTEC Analysis

Fiona Lee, M.Ed., BOTEC Analysis

David Hsia, J. D., M.D., M. P.H. , Health Care Branch

Mark Krusha,t. M. P.H., Health Care Branch'
 .' 
. , 
DRG 79: RESPIRATORY INFECTION 
RICHARD P. KUSSEROW 
INSPECTOR GENERAL 
OAI-12-801190  JULY 1989  . '
Contract Information
Contractor
 Project Officer 
BOTEC Analysis Corporation
 David Hsia, J.  , M.D., M.
Thid Floor  EHR G-lO-

JF Strt 
36  Offce of Inspector General

Cambridge, MA 02138  6325 Securty Boulevard
Baltimore, MD 21207 
Contract number
HHS-l00-88-0019  .................".."..".,.'"...."..."...."....'..".... . .... .
.. .. ..  ..  .. ..  ... .  ..  ..  ...  ..  .. .  ..  ..  ..  ..  ..  . ..  ..  ..  ..  ...  ...  .. . . . . . . . . . . . ...   ...   .. ..  ..  ..  ..  ..
. . . . . . . ..  ....    .....     .....     ......      .......       ........       ........        ........        .........         .........         .........         .........         .........         .........         .........         .........     .   ...... ..       . .........          ...........           ...........           ...........           ............            ............            ............            ............            ............            ............            ............            ............         .  ......... ..         .  .......... .           ............            ............            ............            ............            ............            ............            ............            ...........           ............            ............            ............            ............            ...........           ............           ............            ............   .        ........ ...      . .......        ........
TABLE OF CONTENTS
EXECUTIV SUMARY
INTRODUCTION..................................................... .
BACKGROUN........................................
PPS vulnerabilties. . . . . . . . . .. .. . 
Clais processing. 

DRG 79 ............................................................

METHODOLOGY. . . . . . . 
FININGS. . . 
. . . . . . . . . . . . . . . . . . . . . . .4
Sample charcteristics. . . . . . . 
. . . . . . .4
Assignent errors. . . 
Dirtion of errrs. . 
Soureoferrors ......................................................

Reasons for errors. . 

Financia effects. . . . . . . . 
Corrt 
DRG assignment. . . . . .. 
Clinical review results. . . . . . . . . . . . . . . . 
RECOMMNDATIONS. . . . 
Appendi A-I: DRG 79 discharges from all PPS hospitals. . . . . . . . . . . . . . . . . .. 
.. A-
Appendi A-2: DRG 79 sampling frame. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. A-
Appendi A-3: DRG 79 hospital demography. . . .. . . . . . . . . . . . . . . . . . . . . . . . . .. A-
Appendi A-4: DRG 79 hospita demogrphy comparson. . . . . . . . . . . . . . . . . . . .. A-
Appendi A-
-A .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .yhpargomed tneitap 97 GRD :5
Appendi A-6: DRG 79 patient demogrphy comparson. . . . . . . . . . . . . . . . . . . . .. A-
Appendi B-1: DRG 79 errors. . . . . . . . . . . . . . . . . 
Appendi B-2: DRG 79 errors comparson. . . . 
Appendix B-3: DRG 79 errors by patient demogrphy. . . . 
AppendiC-l:DRG79diectionoferrors 
Appendix C-2: DRG 79 diection of errors comparson...... 
Appendix C-3: DRG 79 diection of errors by patient demography. . . . . .  ............................. .
, ,  . . . .. . . . . . . . . . . . . . .
, .  . . . . .. ... .. .. .. ..  ..  . . . ..  ..  ...   ...   ...   ...
Appendix D-l: DRG 79 hospital deparent makng error. . 
. . . . . .. . . . . . . . . .. .. D-
Appendi D-2: DRG 79 hospita deparent makng error comparson. . . . . . . . . .. D-
Appendix D-3: DRG 79 hospita deparent makng error by patient demogrphy. . D-
Appendix E-l: DRG 79 reasons for errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Appendix E-2: DRG 79 reasons for errors by hospita demography. . . . . . . . . 
Appendix E-3: DRG 79 reasons for errors comparson. . . . . 

Appendix E-4: DRG 79 reasons for errors by patient demography. . . . . . . . . . . . . . . .

Appendix F-l: DRG 79 corrted relative weights. . . . . . . . . 
Appendi F-2: DRG 79 corrted reimbursement. 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-
AppendixF-3: DRG79 estiated cost of errors 
Appendix G-l: Corrct MDC for discharges miscoded to DRG 79 . . . . . . . . . . . . . .. G-
Appendi G-2: Corrt DRG for discharges miscoded to DRG 79 
. . . . . . . G-
Appendix G-3: Prncipal diagnoses correctly biled as DRG 79 
................. G-
Appendi G-4: Prcipal diagnoses incorrectly biled as DRG 79 
............... G-
Appendix H-l: DRG 79 clinical review. . . . . . . . . . . . . . . . . 
. . . . . . . . . . . . . . . . . .. H-
Appendi H-2: DRG 79 clinical review comparson. . . . . . . . 
. . . . . . . . . . . . . . . . .. H- EXECUTIVE SUMMARY 
BACKGROUND 
Under the prospective payment system, the diagnosis relate group (DRG) 79 represents 
respirtory inections. This inspection determnes the accuracy of bilings to Medcare for 
DRG 79. 
FINDINGS 
Weighted by discharges, 17.4 percent of bils paid as DRG 79 should have been 
assigned to a diferent DRG. This error rate parallels the incidence for al DRGs as 
measur by the National DRG Valdation Study. 
Hospitas overpaid themselves on  all  discharges incorrectly biled to DRG 79. Ths rate 
signcantly exceeds the 59. 6 percent rate for all DRGs in the National DRG Validation 
Study. 
Mis-specifcation of the principal diagnosis by the attending physician caused 
the most 
errors. "Other" errors occur second most frequently. 
These bils should group pricipaly to DRGs for respiratory or otolarngological
disorders. Bettr medcal histories, diagnostic testing, or understading of codg
crteria would avoid such errors. 
RECOMMENDATIONS 
The Health Care Financing Admistrtion (HCFA) should dict the peer review
organzations (PROs) to review more DRG 79 bils for codng accuracy. 
The HCF A should diect the PROs to educate physicians and hospitals about the proper 
codng of DRG 79. 
dit 
The HCFA should  the PROs to discourage the use of unnecessarly nonspecifc 
disease codes in bils for respirtory diseases. 
The HCFA disagrees with the fist recommendation and agrs with the remaining recommen
dations. The Offce of Inspector General modfied this repon in light of the HCFA comments, 
but contiues to believe that full implementation of all its recommendations would 
reoup a
projected $89.3 mion in overpayments for Fiscal Year 1990.  " .
' (
INTRODUCTION 
BACKGROUND 
On October 1 1983, the Health Car Financing Admistration (HCFA) began implementing 
new system of payment for inpatient hospita services under the Medcar program. The new 
prospective payment system (PPS) replaced the cost-based reimbursement system. Congrss 
mandate this change because of rapid growth in health care costs, pancularly inpatient ex 
penses under Medcare. 
Under PPS, hospitas reeived a pre-established payment for each discharge, based upon the 
diagnosis related group (DRG) to which the dischare is assigned The PPS classifed dis 
charges into clicaly coherent groups which used simiar amounts of hospita resources, 
based on varables such as diagnosis; evaluation and tratment procedurs; and patient age, 
sex, and discharge status. Each of the 473 DRGs had an associate relative weight, which rep 
resented the average cost for hospita car provided to patients with diagnoses grouping to that 
DRG as a proponion of the cost of the average patient. The hospital received ths payment, in-
dependent of the actual length of hospitaization or cost of treatment for the individual patient. 
The hospita retaned any surlus frm patients consumig less than the expected amount of 
resoures, and suffere losses on those patients consumig more. 
The shit from cost-based, retrospective reimbursement to prospective payment constituted 
one of the most dramatic changes in health care reimbursement since the creation of Medcare. 
A fied payment per discharge induced hospitals to implement economies and reuce unneces 
sar servces. The total payments to the hospitas provided the same financial resources for pa 
tient car. In effect, PPS reversed the financial incentives for hospitas. Where the 
cost-reimburement system rewarded longer hospital stays and more costly treatments, PPS re-
warded earlier discharges and less costly procedures. One of the first consequences of the 
new payment system was a drop in average length of hospita stay for Medicar patients. 
PPS vulnerabilities 
The advent of PPS created new opponunities for manipulation or "gamng" to increase hospi 
tal revenues frm Medcar patients. To protect the integrty of PPS and maintan quality of 
care Congress established the peer review organizations (PROs) to monitor hospital activities. 
The Offce of the Inspector General (OIG) conducted the National DRG Valdation Study 
(NDRGVS) to surey the general accuracy of DRG assignment and quality of care performed 
by hospitas under PPS. Its examnation of 700 medcal records established that assignment 
errors resulted in $300 milion in overpayments to hospitals and that the majority of overpay 
ments could be trced to assignment errrs afectig a small number of DRGs. This repon is 
one in a series examing assignment accurcy of one of the DRGs identified as having the 
highest impact on overpayments under PPS and the gratest potential for cost recovery.  , ,
. "
The PPS gamg takes two principal forms: optimization and crep. "Optimization" strate 
codg 
gies adhere to  rules, but maximze hospita reimbursements by selectig the most ex-
pensive among viable alternative principal diagnoses or adding more secondar diagnoses. 
The PPS permts optimization, which flows from the basic incentive 
strcture of the PPS sys 
tem. 
DRG crp" results from codg practices which do not conform to codg 
rules. Sources of 
DRG crep include: 
The attendig physician wrtes an incorrect principal 
Mis-specifcation: 
diagnosis (defined by the Uniform Hospital Discharge Data Set (UDS)
that condition established after study to be chiefly responsible for occasioning
the adssion of the patient to the hospital for care ), seconda diagnoses, or 
procedures on the attestation sheet. 
Miscoding:  The hospita assigns incorrct numeric codes to diseases or 
proedures correctly attested to by the attending physician. 
The hospital substitutes a secondar diagnosis for the correct
Resequencing: 
principal diagnosis.
Auditig and review practices seek to cunail ilegal crp by identiying discharges in which
codg 
rules are misapplied or ignored. 
Claims processing 
Under PPS, the hospita files a 
clai for Medicare reimbursement upon discharging the benefi
ciar. At the tie of discharge, the attending physician attests to the pricipal diagnosis which
caused the patient s admssion to the hospita, seconda diagnoses, and procedurs (diagnos 
tic and therapeutic) provided. The hospita 
trslates the nartive diagnoses of the
physician s attestation statement into numeric codes based on the International Classification
of Diseases, Ninth Revision, Clincal Modcation (lCD- CM), and prepars a claim. Fiscal 
intermedar (PI) organzations, working under contract with HCFA, enter the hospital's codes 
progr 
into the GROUPER computer  which assigns the appropriate DRG for reimbursement.
Hospita reimbursement is calculated by multiplying the "relative weight" of each DRG cate 
stadadi 
gory by a  amount, as modfied by cenan hospital-specifc factors. The relative
weight of each DRG vares above or below 1.00 accordig to the average amount of hospi 
ta resoures used by patients in that diagnostic grup. The higher the relative weight, the 
greater the reimburement. Mis-assignment of the ICD- CM categories, or erroneous assign
ment or sequencing of patient diagnoses, can thus have significant financial implications. 
DRG 79
Under the prospective payment system, the DRG 79 represents major respiratory infections
such as tuberculosis, klebsiella pneumonia, pseudomonas pneumonia, staphylococcal pneumo 
nia, and aspiration pneumonitis. It does not pay for discharges grouping to the DRGs for sim
ple pneumonia, bronchitis, respiratory failure, chronic obstrctive pulmonar disease, pleura . .
effusion, or lung cancer. These DRGs may be present with superfcially similar symptoms
but actualy have entiely dierent underlying causes, prognoses, and resource consumption.
Cena 
abscesses, parasites, and toxic injuries to the lung also fall under DRG 79. 
DRG 79
Relative Weight 
"* Discharges (10 K) 
-a Charges ($ 100M) 
.. Payment ($100 M) 
'* Mean payment ($ 1 K) 
1984  1985  1986  1987  1988
Fiscal Year 
This study examnes erroneous assignment and gamng in a single DRG: 79, respiratory infec 
tion. Ths DRG appear pancularly 
vulnerable to mis-assignment due to its high relative
weight (1.7795) and its high ratio of overpayments. (Appendix A-
I). Subsequent to the period
examned by tls study and effective Fiscal Year (F) 1988, the HCFA altered DRG 79 to de 
lete age over 69 years as a qualfying criterion
, excluded cenai complication codes, and cr 
ated a new DRG for ventiator patients. These changes slightly reduce the number of
discharges gruping to DRG 79.
METHODOLOGY
Ths study used a 
strtied two-stage sampling design based on hospitals to select medcal 
records for review. The fist stage used simple random 
sampling without replacement to se 
lect up to 80 hospitas in each of thee be size strata: Less than 100 bes 
(smal), 100 to 299
beds (medum), and 300 or more bed (large). T,he  sec1ond st9age o8f  5. 
the design employed sys 
tematic radom sampling to select up to 25 DRG 79 bils from each strata for Medicare dis 
charges between October 1 , 1984 and Marh 31
I2 
-:100
Sample Design 
Figure  2: 
i2 100-299 
300+
DRG 79  All DRGs  The DIG contrcted with the Health Data Institute (HI) of Lexington, Massachusetts to 
reabstrct the medcal records. Upon reeipt, the contrctor "blinded" the ICD- CM codes 
Accrted 
by coverig them, and assigned an identication number to each record. An 
Record Technician or Registere Record Admnistrtor proficient in ICD- CM codng re-
proe
viewed the entie record to substatiate the pricipal diagnosis, other diagnoses, and 
dures indicated by the attending physician in the narative attestation form. Any reords 
which did not suppon the assigned DRG classification were referred to physician reviewers. 
The physician reviewers designated the corrt Uniorm Hospita Discharge Data Set pricipal 
diagnosis, and addtional diagnoses and/or proedures which were substantiated by the patient 
records. The GROUPER computer program proessed the reabstracte ICD- CM codes to 
determne corrt DRGs. A full discussion of the methodology and fmdings of the contractor 
record review is avaiable in the fmal repon of the National DRG Validation Study (avaiable 
from DIG Public Affais). 
The DIG contrcted with BOTEC Analysis of Cambridge, MA to examne this data to identify 
sources of assignment errors and make recommendations for recovery of overpayments. 
FINDINGS 
Sample characteristis 
In FY 1985. 56,705 of the 8.3 milion prospective payment discharges (0.7 percent) grouped 
to DRG 79. The National DRG Valdation Study estimates that they came principally frm 
large and medum siz hospitas. In the first hal of FY 1985, the 239 hospitas selected in 
stage-one of the sample design (the sampling frame) biled for 222 396 discharges of which 
432 came from DRG 79. (Appendix A-2). 
Hospital Demography 
Figure  3: 
Yes 
DRG 79: Urban 
All DRGs: Urban 
DRG 79: Teaching 
All DRGs: Teaching 
DRG 79: Profit 
m.--.............................--m".-m"'''''.''''''''''''''''.''''''''''''mm...--. 
All DRGs: Profit  h".....-...................--_mh--m_m".-m-................................'''umm.... 
100 
Percent 
Additionaly, the two-stage sample design permts calculation of separate results for Medcar 
beneficiares (the probabilty of something happening to a person) and hospitals (the odds of 
an event at a pancular hospita). Therefore, the appendices, tables , and chars repon individ
ual totals weighted by both discharges and hospitals.  ! '
The majority of DRG 79 discharges, reflecte both in the sample numbers and in the dis 
charge-weighted percentages, were from urban, nonteaching, and nonprofit hospitas. 
miore 
(Appendi A-3). For each hospita type, the discharge-weighted percentage  those in 
the National DRG Valdation Study. (Appendix A-4). 
The DRG 79 discharges were, on average, older, male, longer staying, and more expensive
than discharges from either the National DRG Validation Study or the Medcare population.
(Appendi A-5). There were no instances of monaity in the DRG 79 sample.
(Appendi A-6).
Assignment errors 
Weighted by dicharges, 17.2 percent of bils paid as DRG 79 grouped to a different DRG 
after reabstrction. Assignment  3 percent) occured more frequently in sma 
errors (33.
hospitas' bils for DRG 79 than for all DRGs (23. 6 percent). 
Patint Demographics

DRG 79  National DRG  All 
Validation Study  Medicare 
Age (years)  77.  73.  not available 
Sex (% male)  54.  46.  42. 
LOS (days)  11. 
Payment ($)  5205.  3150.  2985 Urban 
2381 Rural 
Mortalijy (%j  not available 
In hospitas of 300+ beds, the 8.0 percent, discharge-weighted rate of assignment errors for 
DRG 79 was less than half the 16.6 percent reponed in the National DRG Validation Study. 
(Appendi Bel). 
Coding Errors

Pecent 
DDRG79 
IZ  AI DRGs 
.'00  '00'" 
Be ,..

Urban, nonteaching, and nonprofit hospitas had significantly higher percentages of errors 
ru, 
than did their  teaching, and for-profit counterpars. However, as a 
percent of the tota 
discharges, none had an error rate above 16 percent. Comparson to the hospita demograph  , , 
ics for all discharges reveals that only urban hospitals have a higher error rate for DRG 79 
than for al DRGs. (Appendi B-2). 
Discharges incorrtly paid as DRG 79 had a slightly older average age (78.7 years versus
77.4 .years), lower proponion of males, and much shoner lengths of stay than those assigned 
corrtly. In the case of length of stay, the disparty was most pronounced in large hospitas 
3).
where those incorrtly assigned as DRG 79 had average stays of 4.5 days whie those as-
signed correctly averaged stays of 13 days. In the case of average payment, in both smal and 
medum size hospitas, payment for discharges assigned incorrectly exceeed payment for 
discharges assigned corrtly. (Appendi B-
Percnt  Direction of Errors 
DRG 79: Overpymen'
r/:  I1 DRG 79: Underpaymen' 
IZ 
National DRG:  Over 
National DRG: Under
dOC  10029  300.
Bed size 
Direction of errors 
As indicated, all of the errors in DRG 79 resulte in overpayments to hospitas. 
(Appendi C-l). The National DRG Valdation Study found that only 61 percent of the errors 
resulte in overpayments to hospitals. (Appendix C-2). 
Source of errors
The majority of errrs in DRG 79 discharges occurr when hospitals incorrtly coded the 
discharges as DRG 79 and biled it accordngly. 
Only 2 of the 15 errors resulted when med
cal record corrtly indicate a different diagnosis, but the hospita adnistrtion biled it 
DRG 79 anyway- Both of the biling errors occur in small hospitals. (Appendix D-
Reasons for errors
Nartive errors by the attendig physician caused a pluralty of errors in codng to DRG 79.
(Appendi E-l). The remainder of the errors divided among miscodng, resequencing, and 
other tyes of errors. (Appendi E-2). Resequencing errors occurr less often in DRG 79 
than in the National DRG Validation Study. (Appendix E-3). " "
Reasonsfor Errors 
Misspecification
rz 
Miscoding
II 
Resequencing
rz 
Other
DRG 79  All DRGs 
Discharges with resequencing errors proved to be significantly older than those subject to
other tyes of e!Tors. Discharges with resequencing errors also had substatially higher rates
of payment. (Appendi E-4).
Financial effects
After reabstrction, the average relative weight for discharges in this sample dropped from
1.7795 to 1.5839. (Appendix F-
l). For the 74 discharges in ths sample, this equalled an 
faggrgate drop in relative weight of -14.4744. Weighted by discharges, these changes imply
a 9.7 percent decease, representing overpayments to the hospitas due to codng errors. 
(Appendi F-2). 
Extrapolated to the enti Medcar population, errors in assignment to DRG 79 resulted in 
$28.3 mion of overpayments durg the study year. Mid-size hospitals were 
responsible
for the largest share of the overpayments. The rapid increase in DRG 79 
reimburement im
plies overpayments of $77.6 million in FY 1989 and $89.3 millon in FY 1990. 
(Appendi F-3). 
Correct DRG assignment 
The DRG 79 falls into Major Diagnostic Category (MDC) 04: Respiratory diseases. 
The cod
ing 15 errors in ths sample spread across seven MDCs. (Appendix G-lJ. 
The MDC 03 (Ear
nose, and that) accounted for 20.0 percent of the errors. Within this MDC, all errors should
have assigned to DRG 73: Other ear, nose and thoat. This DRG has a relative weight of
0.5163, compared to the 1.7795 for DRG 79. (Appendix G-
2).
Turning to pricipal diagnoses correctly biled to DRG 79
, aspirtion pneumonitis, klebsiella 
pneumonia, pseudomonas pneumonia, and staphylococcal pneumonia appear most 
fruently.
Interestingly, the corrt diagnoses seem less vague than incorrct diagnoses ("nonspecific,
not otherwise specified,  not elsewhere classified"
). (Appendix G-3).  , .
""'"
Overpayments 
100 
198  1985  1986  1987  1986  1989  199 
Fiscal Year 
Analyze at the level of ICD- CM codes, pulmonar disorders incorrectly biled as DRG 79 
include bronchitis, nonspecific pneumonia, nonspecifc pharngeal disease, and foreign body 
lodged in the larnx. Less understandably, volume depletion, transient ischemic attack, pan 
creatitis, urar trct infection, coma, and observation appear among the corrected pricipal 
diagnoses for erroneous DRG 79 bils. (Appendix G-4J. 
Clinical review results 
Only five discharges, representing 7.8 percent of cases when weighted by discharge, were 
judged inappropriate ("an adssion in which the care received by the patient was either not 
neeed or did not require the use of the inpatient setting ). (Appendix H-IJ. This number was 
less than 10.0 percent reponed for all DRGs. There were no cases of prematu discharges. 
(Appendi H-2J. 
Of the 74 cases in the sample, 8.9 percent evidenced "qualty of car not meetig profession
aly recogn standas." This rate significantly exceeded the 5.5 percent of the National 
DRG Validation Study. 
Clinical Incidence 
DRG79 
Al DRGs 
l.de IIUlOO
 Poo ,,!t c:
 Pr'rTUtdisdwge  ! .
RECOMMENDATIONS 
The HCFA should diect the PROs to review more DRG 79 bils for codng 
accuracy. 
The HCF A should diect the PROs to educate physicians and hospitals about the 
proper codng ofDRG 79. 
The HCFA should diect the PROs to discourage the use of unnecessarly 
nonspecifc disease codes in bils for respiratory diseases. 
The HCFA disagrees with the fist recommendation and agrs with the remaining recommen 
dations. The Offce of Inspector General modfied ths report in light of the HCFA 
comments, 
but contiues to believe that full implementation of all its recommendations would recoup a 
projected $89.3 millon in overpayments for Fiscal Year 1990.  " . p"! 
, ' 
dischar  from all PPS hospitals 
es 
ePendix A-1 : DRG 79 
Fiscal Year  1984  1985  1986  1987  1988
Relative weight  7982  7795  8488  9344  0777
Number of discharges  830  56.705  76,721  101  197  757
Total charges ($ millon)  206.  497.  756.  802.  055.
Total reimbursement ($ millon)  129.  291.  423.  591.  617.
Average reimbursement ($)  807  148  515  847  192 
sam  frame 
pEmdix  2: DRG 79 
Number  Bed size 
",100  100-299  300+  Total 
Medicare population  434  398  873  56, 705 
Sampling frame  145  423  864  1432 
Sampled 
Sampling fraction (%)  (16.  (5.  (2.  (5. 
demog 
ePendix A-3: DRG 79 hospital 
Number  Bed size 
Wei  ercenta 
hted 
(Percent)  0( 1 00  1 00-299  300+  Tota  Sample Discharge Hosita 
Urban 6 (25.  17 (68.  23 (92.  (62.  (70.  (49.
Rural 18 (75. 
8 (32.  2 ( 8.  (37,  (29.  (50.4)
Teaching 0 ( 0.  9 (36.  13 (52.  (29.  (36.  (20.
Nonteaching 24 (100)  16 (64.  12 (48.  (70.  (63.  (80.
Prom
4 (16.  3 (12.  0 ( 0.  ( 9.  ( 7.  (12.
Nonprofit 20 (83.  22 (88.  25(100.  (90.  (92.  (87. 
Total  24 (100)  25 (100)  25 (100)  (100)  (100)  (100)  ,. '
demo  comparison 
endix  A-4: DRG 79 hospital 
Percent  Bed size  Wei  ercenta 
hted 
",100  100-299  300+  Sample  Discharge Hospijal 
Urban  DRG 79  25.  68.  92.  62.  70.  49. 
NDRGVS  19.  70.  94.  62.  71.  48. 
Rural  DRG 79  75.  32.  37.  29.  50.4 
NDRGVS  80,  29.  38.  28.  52. 
Teaching  DRG 79  36.  52.  29.  36.  20. 
NDRGVS  18.  55.  25.  31.  16. 
Non- DRG 79  100  64.  48.  70.  63.  80. 
teaching  NDRGVS  97.  81.  44.  74.  68.  83. 
Prom  DRG 79  16.  12.  12. 
NDRGVS  17.  9.4  10. 
Non- DRG 79  83.  88.  100  90.  92,  87. 
profit  NDRGVS  90.  82.  97.  90.  90.  89. 
AIYndix A- demo 
5: DRG 79 patient 
Bed size  Wei  hted avera 
dOO  100-299  300+  Sample  Discharge  Hospital 
Age (years)  81.  78.  75.  78.  77.  79. 
Sex (% male)  54.  72.  40.  55.  55.  57. 
LOS (days)  10.  12.  10.  11.  10. 
Payment ($)  3544  5177  5923  4899  5191  4452 
Mortalijy (%)  24,  12.  13.  9.4  " .
(($%) ) 
demo  comparison 
ndix  6: DRG 79 patient 
Bed size  Wei  hted avera 
",100  1 00-299  300+  Sample  Discharge  Hospnal 
Age  DRG 79  81.  78.  75.  78.  77.  79. 
(years)  NDRGVS  76.  74.  72.  74.  73.  74. 
Sex  DRG 79  54.  72.  40.  55.4  55.  57. 
(%male)  NDRGVS  43.  45.4  48.  45.  46.  44. 
LOS  DRG 79  10.4  12.  10.  11.  10. 
(days)  NDRGVS  7.4 
Payment  DRG 89  3544  5177  5923  4899  5191  4452 
NDRGVS  1849  2923  3807  2860  3115  2508 
Mortalny  DRG 89  24,  12.  13.  9.4 
NDRGVS  6.4  , ' 
, " 
1: DRG 79 errors 
endix 
Number  Bed size  Wei  ercenta 
hted 
(Percent J  100-299  300+  Tota  Sample Discharge Hospital 
oc 1 
2 (8.
Urban  4 (66.  4 (23.  (21.  (25.  (43. 
0 (0. 
Rural  4 (22.  1 (12.  (17.  ( 9.  (15. 
0 (0. 
Teaching  3 (33.  (13.  (13.  (10. 
Nonteaching  8 (33.  2 (12.  2 (16.  (23.  (18.  (23. 
Prom  2 (50.  0 (0.  (28.  ( 9.  (25. 
2 (8. 
Nonprofit  6 (30.  5 (22.  (19.4)  (17.  (24. 
2 (8. 
Total  8 (33.  5 (20.  (20.  (17.4)  (25. 
2: DRG 79 errors com  arison 
endix 
Percent  Bed size  Wei  ercenta 
hted 
,,100  1 00-299  300+  Sample  Discharge Hosp 
Urban  DRG 79  66.  23.  21,  25.  43. 
NDRGVS  22.  19.  16.  18.  17.  20.4 
Rural  DRG 79  22,  12.  17.  15. 
NDRGVS  23.  16.  22.  21.  20.  21, 
Teaching  DRG 79  33.  13.  13.  10, 
NDRGVS  20.  20.  15.  17.  17.  19. 
Non- DRG 79  33.  12.  16.  23.  18.  23. 
teaching  NDRGVS  23.  17.  17.  20.  19.  20. 
Prom  DRG 79  50.  28.  25. 
NDRGVS  23.  18.  18.  20,  19.  21. 
Non- DRG 79  30.  22.  19.4  17.  24. 
profit  NDRGVS  23.  18.4  16.  19.4  18.  20. 
Total  DRG 79  33.  20.  20.  17.  25. 
NDRGVS  23.  18.  16.  19.  18.  20.  '. ' , . 
(($%) ) 
endix B-3: DRG 79 errors bY"'  demo 
atient 
Bed size  Wei  hted avera 
dOO  1 00-299  300+  Sample  Discharge  Hospnal 
Age  Correct  79.4  78.  75.  77.4  77.  78, 
(years)  Incorrect  84.  81.  71.  81.  77,  81. 
Sex  Correct  50.  75.  43.  55.  57.  57. 
(%male)  Incorrect  62.  60.  53.  35,  51. 
LOS  Correct  11.  13.  11.4  11.  10. 
(days)  Incrrect 
Payment  Correct  3303  4985  5933  4899  5075  4267 
Incorrect  4026  5941  5812  4903  5534  4933 
Mortalny  Correct  12.  17.4  10. 
Incorrect  20.  100.  20.  50,  22.  ' ,
C-1: DRG 79 direction of errors 
endix 
Number of Bed size  Wei  ercenta 
hted 
overpayments  ",100  100-299  300+  Total  Sample Discharge Hospijal 
(Percent) 
Urban  4(100.  4 (100.  2 (100.  (100)  (100)  (100)
Rural  4(100.  1 (100.  (100)  (100)  (100) 
Teaching  3(100.  (100)  (100)  (100) 
Nonteaching  8 (100.  2 (100.  2 (100.)  (100)  (100)  (100) 
Prom  2 (100.  (100)  (100)  (100) 
Nonprofit  6 (100,  5 (100.  2 (100.  (100)  (100)  (100) 
Total  8 (100.  5(100.  2 (100.)  (100)  (100)  (100) 
C-2: DRG 79 direction of errors comparison 
endix 
Percent  Bed size  Wei  ercenta 
hted 
",100  100-299  300+  Sample  Discharge  Hospijal 
Urban  DRG 79  100.  100.  100.  100  100  100 
NDRGVS  53.  60.  57.  58.  57.  56, 
Rural  DRG 79  100.  100.  100  100  100 
NDRGVS  66.  57.  65.  64.  62.  63. 
Teaching  DRG 79  100.  100  100  100 
NDRGVS  66.  59.  56.  57.  59.  62. 
Non- DRG 79  100.  100.  100.  100  100  100 
teaching  NDRGVS .  64.  59.  59.  61,  60.  61. 
Prom  DRG 79  100.  100  100  100 
NDRGVS  68.  55.  63.  60.  61.  63. 
Non- DRG 79  100.  100.  100.  100  100  100 
profit  NDRGVS  63.  60.  57.  60,  59.  61. 
Total  DRG 79  100.  100.  100.  100  100  100 
NDRGVS  64.  59.  57.  60,  59.  61.  (($%) ) 
. I
C-3: DRG 79 direction of errors  demo 
endix  buatient 
Bed size  Wei  ercenta 
hted 
,,100  100-299  300+  Sample  Discharge  Hospijal 
Age  Overpay  84.  81.  71.  81.5  777  81. 
(years)  Underpay 
Sex  Overpay  62.  60.  53,  35.  51.8 
(%male)  Underpay 
LOS  Overpay 
(days)  Underpay 
Payment  Overpay  4026  5941  5812  4903  5534  4933 
Underpay 
Mortality  Overpay  20.  100.  20.  50.  22. 
Underpay  . " . "
1: DRG 79 hospital department making error
ependix D-
Coding department  Bed size 
Wei  ercenta 
hted 
errrs (Percent)  d 00  100-299  300+  Tota  Sample Discharge Hospita 
Urban  3 (75.  4(100.  2(100.  (90.  (95.4)  (87.
Rural  3 (75.  1 (100.  (80.  (53.  (71. 
Teaching 
3 (1 00.  (100.  (39.  (32.
Nonteaching  6(75.  2(100.  2(100.  (83.  (95.  (87. 
Profit 
1 (50.  (50.  (9.  (25.
Nonprofit  5(83.  5(100.  2(100.  (92,  (96.  (91.4) 
Total  6(75.  5(100.  2(100.  (86.  (95.4)  (87. 
Balance of errors made by hospital billng department.
2: DRG 79 hospital department making error comparison 
endix 
Percent of errors by  Bed size  Wei  ercenta
coding department  dOO  100-299  300+  Samphlteed   Discharge Hospital 
Urban  DRG 79  75.  100.  100,  90.  95.4  87.
NDRGVS  89.  88.  90.  89.  89.  89. 
Rural  DRG 79  75.  100.  80.  53.  71.
NDRGVS  94.  95.  90.  94.  93.  94. 
Teaching  DRG 79  100.  100  39.  32.
NDRGVS  91.  92.  89.  90.  91.  91. 
Non- DRG 79  75.  100.  100,  83.  95.4  87.
teaching  NDRGVS  93.  90,  92,  92,  91.  92. 
Profit  DRG 79  50.  50.  25,
NDRGVS  86.  92.4  81.8  89,  86.  87.4 
Nonprofit  DRG 79  83.  100.  100.  92.  96.  91.4
NDRGVS  94,  90.  90.  92,  91.4  92. 
Total	 DRG 79  75.  100.  100.  86.  95.4  87.
NDRGVS  93.  90.  90.  91.  91,  92,  (($%) ) 
, " 
Appendix D-3: DRG 79 hospital department making error by patient 
demo 
Bed size  Wei  hted avera 
",100  100-299  300+  Sample  Discharge  Hospnal 
Age  Coding  82,  81.  71.  80.4  77,  80.4 
(years)  Biling  89.  89.  16.4  45. 
Sex  Coding  50.  60.  46.  32,  45.4 
(%male)  Billng  100.  100  18.4  51. 
LOS  Coding  6.4 
(days)  Billng  4.4 
Payment  Coding  4061  5941.  5812  5054  5541  4951 
Billing  3921  3921  722  2023 
Mortalny  Coding  20.  100.  40.  50,  22. 
Billng  . '
, ", '
1: DRG 79 reasons for errors 
endix 
Number  Bed size 
",100  1 00-299  300+  Total (Percent) 
Mis-specnication 
(40. 
Miscoding 
(13. 
Resequencing 
(20. 
Other 
(26. 
Total  (100.) 
2: DRG 79 reasons for errors by  demog.! 
endix  hospital 
Number  Mis-specnication  Miscoding  Resequencing  Other  Total 
(Percent) 
",100 beds  3( 37.  (12.  (12.  (37,  8 (100.
100-299 beds  1 (20.  (20.  (40.  (20.  5 (100. 
300+ beds  2(100.  0 ( 0.  0 (0.  (0. 
2 (100. 
Urban  4( 40.  (10.  3 (30.  (20,  10 (100, 
Rural  2( 40.  (20.  (0.  (40.  5 (100. 
Teaching  0 ( 0.  (0. 
1 ( 33.  2 (66.  3 (100. 
Nonteaching  5( 41.  2 (16.  (8.  (33.  12 (100, 
Prom  0 ( 0.  (50.  (50.  2 (100. 
Nonprofit  6( 46.  (15.4)  (15.4)  (23.  13 (100. 
Total  6( 40.  2 (13.  3 (20.  (26.  15 (100.  , "
, , . '' \
3: DRG 79 reasons for errors comparison 
endix 
Percent  Bed size  Wei  ercenta 
hted 
distribution  ",100  100-299  300+  Sample  Discharge  Hospijal 
Mis  DRG 79  37.  20.  100.  58.  56.  44. 
specnication  NDRGVS  49.  44.  49.4  48.  47.  48. 
Miscoding  DRG 79  12.  20.  13, 
NDRGVS  10.4  14.  11.4  11,  12.  11. 
Resequencing  DRG 79  12.  40.  17,  18.  20.4 
NDRGVS  31.0  24,  24.  27,  25.  28. 
Other  DRG 79  37.  20.  14.  21.3 
NDRGVS  15.  14.  12.  13.  11. 
demo 
endix  E-4: DRG 79 reasons for errors by patient 
Mis-specnication  Miscoding  Resequencing  Other 
Age (years)  84, 89.  83. 
Sex (% male)  50,  100. 33.(cid:1) 66, 
LOS (days)
Payment ($)  4956  3926 6126  3823 
Mortalijy (%)  33.  50. \ !:,
\ I 
j-i .
1: DRG 79 corrected relative weights 
endix 
Relative weight  Bed size  Average-
,,100  100-299  300+  Total 
eranp. 
Paid  7795  7795  7795  7795 
1 . 
Correct  4834  5709  6933  5839 
1 .
Diference  2961  2086  0862  1956 
v-. 
Paid  42.7080  44.4875  44.4875  131.6830 
Correct  35.6016  39.2725  44.3325  117.2086 
Diference  1064  2150  1550  14.4744 
2: DRG 79 corrected reimbursement
endix 
Bed size  Average-
,,100  100-299  300+  Total 
Avera 
Paid  506  755  226  906 
Correct  756  4198  973  366 
Diference  750  557  253  539 
Total

Paid
 108 137  118.885  125,420  363 009 
Correct
 90.143  104 949  119.344  323.108 
Diference
 993  13.936  075  901 
Overpayment rate (%)  16.  11. 
. Discharge weighted. 
3: DRG 79 estimated cost of errors
endix 
Fiscal Year  Reimbursement  Overpayment 
($ milion)  ($ milion) 
1984  129.  12. 
1985  291.  28. 
1986  423.  41. 
1987  591.  57.4 
1988  617.  59. 
1989 est.  793.  77. 
1990 est.  921.  89. 
Ovrpyment calclated as 9.7 percent of reimbursment 
Estimates based on linear regression.  . \
, ' 
1" , I . .
1: Correct MDC for discharges miscoded to DRG 79 
e,endix G-
Number  Bed size 
,,100  100-299  300+  Total  (Percent) 
01:  Nervous system  (13. 
03:  Ear. nose. & throat  (20. 
04:  Respiratory  (33. 
06:  Digestive 
( 6.
07:  Pancreas and liver 
( 6.
10:  Endocrine and metabolic 
( 6,
11 :  Kidney and urinary tract  ( 6.
23: After care
( 6.
Total  (100. 
2: Correct DRG for discharges miscoded to DRG 79 
e,endix G-
Number  Bed size 
,,100  100-299  300+  Total  (Percent) 
73: Other ear. nose, throat  (20. 
89: Simple pneumonia (13. 
96: 
Bronchitis. asthma  (13. 
Other  (53. 
Total  (100. 
3: Principal diagnoses correctly biled as DRG 
ndix 
Disorder  Number  (Percent) 
Suspected tuberculosis 
( 1.7)
Tuberculosis not otherwise specitied 
( 6.
Klebsiella pneumonia  (18, 
Pseudomonas pneumonia  (16. 
Staphylococcal pneumonia  (16, 
Aspiration pneumonitis  (32, 
Empyema 
( 5,
Lung abscess 
( 1.
Total  (100.  / , 
, .
.\ J . '"
dia  incorrectly biled as DRG 79 
noses 
ependix G-4: Principal 
Disorder  Number  (percentj 
Volume depletion
Transient ischemic attack
Acute bronchnis (13. 
Pharynx not otherwise spec ied

Pneumonia not otherwise specified (13. 
Esophageal stricture
Acute pancreatnis
Urinary tract infection
Coma 
Foreign body in larynx (20. 
Observation 
Total  (100,  . - .. (
1: DRG 79 clinical review 
endix 
Number  Bed size  Wei  hted avera 
(Percent)  ..00  1 00-299  300+  Total  Sample  Discharge  Hospital 
Unnecessary  (4.  (0.  4 (16.  (6,  (7.  (4. 
admissions 
Poor quality  (4.  3 (12.  (8,  (8.  (8.  (7. 
care 
Premature  0 (0.  (0.  (0.  (0,  (0,  (0. 
discharge 
2: DRG 79 clinical review com  arison 
endix H-
Percent  Bed size  Wei  ercenta 
hted 
..00  100-299  300+  Sample  Discharge  Hospijal 
Unnecessary DRG 79  16, 
admissions  NDRGVS  12.  10.  10,  10.  11. 
Poor quality  DRG 79  12, 
care  NDRGVS  11.4 
Premature  DRG 79 
discharge  NDRGVS  0.4  1.4