The Centers for Medicare and Medicaid Services commissioned two studies to help refine the methodologies for calculating cost-based and severity-adjusted diagnosis-related groups for the acute inpatient prospective payment system. The report by the Research Triangle Institute found that charge compression--smaller markups on high-priced items and larger markups on low-priced items--introduces bias to cost-based DRG weights, which can be reduced by refining cost-to-charge ratios. The RAND Corporation evaluated five systems for classifying discharges into severity-adjusted DRGs and found that “the actual impacts under any of the systems will depend on hospital efforts to improve coding practices in response to the specific incentives of the selected system.” CMS will have to “develop an equitable policy for addressing case mix increases attributable to coding improvement,” said the preliminary report. RAND will release its final report in September 2007.
