Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

APRIL 1999 

OEI-03-98-00490 

Medicare Payments for DRG 296: 

Nutritional and Miscellaneous Metabolic 

Disorders 
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 
EXECUTIVE SUMMARY

PURPOSE 

To identify hospitals with atypically high billing patterns for patients with nutritional and 

miscellaneous metabolic disorders (DRG 296). 

BACKGROUND 

Under Medicare’s prospective payment system, a hospital’s payment amount is determined by 

taking a hospital’s individual base payment rate and multiplying it by the weight of the diagnosis 

related group (DRG) assigned to the patient stay. A DRG’s 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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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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TABLE OF CONTENTS

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 General’s 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 hospital’s 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 patient’s 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 hospital’s 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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be approximately $500 per case. 

The Health Care Financing Administration’s 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 General’s 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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DRGs 475 and 416. The methodology in these reports demonstrated a technique that could be 

used to focus HCFA’s 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 President’s Council on Integrity and Efficiency. 

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FINDINGS

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 hospital’s 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 hospital’s 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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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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NEXT STEPS

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. 

)))))))))))

6 
APPENDIX 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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2 The total for this column does not equal 100 percent due to rounding. 

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APPENDIX B

OFFICE OF INSPECTOR GENERAL’S 

VALIDATION WORK FOR DRG 296 

This table shows the results of the Office of Inspector General’s (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% 

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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1