Healthcare is at a crossroads. An aging population is entering Medicare coverage at unprecedented rates. Costs are soaring thanks to inflation and post-pandemic recovery. Increasingly popular high-cost specialty medications are putting further pressure on health plans to find new ways to control costs.
These dynamics come together to create a complex environment that leaves health plans grabbing at any strategy they can find to help control these overwhelming costs while ensuring fair and accurate payments and little to no impact on patient care.
Given this shifting landscape, it’s not surprising to see the increase in utilization of diagnosis-related group (DRG) reimbursement on inpatient claims. DRGs aren’t necessarily new, but they are becoming more prevalent for cost containment strategies and ensuring payment accuracy. Health plans and providers alike are always looking to explore new, innovative and different payment and reimbursement strategies. And when it comes to some of the most common inpatient procedures and patient encounters, DRGs are a vital strategy to leverage.
Originating in the 1970s at Yale University, DRGs began as a classification system based on patient characteristics. By 1983, Congress mandated their use within Medicare’s payment systems, transitioning from a cost-based to a fixed payment system based on the patient’s diagnoses. This change aimed to encourage hospitals to deliver care more efficiently without sacrificing quality. DRGs have since become a fundamental payment methodology for many health plans.
DRG claims set standard pricing requirements for some of the more common health events requiring inpatient care – sepsis, heart failure or respiratory infections, for example. As healthcare continues to face mounting costs, expensive drugs and therapies, an aging population, and complex claims, DRGs continue to be a great avenue to help keep costs consistent without compromising patient care.
And isn’t that the ultimate goal? To get the coding and reimbursement right every time so the healthcare system can function as needed and all parties are engaged, as appropriate, in the financial side of healthcare. Reevaluating payment integrity to ensure fair and reasonable provider payments is essential, and more health plans should consider using DRG validation to help do exactly that.
Here are just a few of the benefits:
Accurate claims and cost control:
DRG reimbursement plays a crucial role in controlling healthcare costs for payers. These pre-determined diagnosis groupings are set for just about all of the most common and significant inpatient encounters and ensure consistent reimbursement for services and care rendered. These complex algorithms even allow for variability for patient complexity, comorbidities and can even handle extreme outlier cases. Ensuring these complex claims are accurately coded and billed according to the actual services provided helps in maintaining financial balance and preventing unnecessary expenditure on healthcare claims.
In a scenario where a payer wants to accurately pay for the services rendered and a provider wants to maximize reimbursement, a thorough review of the DRG can provide balance. For instance, a provider treats a patient for an open fixation with insertion of retrograde intramedullary implant for femur fracture and non-operative ankle fracture and bills MS-DRG 481. Upon review of the claim, MS-DRG 481 is not supported in the documentation of the patient’s medical records, requiring an adjustment to DRG 482, ultimately reducing the claim reimbursement by 38%.
Managing provider abrasion and ensuring fair reimbursement
Health plans receiving accurate claims means providers can be fairly compensated for the care they deliver. This – along with clear explanation of findings – fosters a positive relationship between payers and providers, as it assures providers that they will receive fair and timely payments for their services. By using DRG Validation, payers demonstrate their commitment to fair practice and integrity in healthcare reimbursement, which can enhance their reputation and strengthen provider networks.
Every patient’s hospital encounter is unique and medical documentation can be elaborate, requiring the appropriate checks and balances in place. At the end of the day, even the member can benefit from these reviews as their out-of-pocket member cost share responsibility could be impacted if the claim is not paid accurately.
Operational efficiency and resource allocation
By identifying and addressing discrepancies in high-cost claims, payers can streamline their operations and focus resources on areas that require more attention. This efficient resource allocation not only improves operational performance but also enhances service delivery to members.
Why health plans need to conduct DRG claim validation
As healthcare costs continue to rise, the need for accurate and efficient payment systems is increasingly important. DRG validation offers a proactive approach to managing common inpatient claims that are often quite nuanced and ripe for overpayments.
While DRG validation offers multiple benefits that directly impact the financial and operational aspects of healthcare, it does require highly skilled clinicians and coders who can interpret complex medical records and understand nuanced coding guidelines. That’s why it’s crucial for health plans not to rely solely on technology.
Each claim is an individual patient story, and those stories shouldn’t be completely automated. Technology is an invaluable resource for creating more efficiency, but both technology and skilled experts coupled together reviewing these claims is imperative to avoid costly overpayments and get the claim paid accurately for all parties. Technology alone cannot identify and understand such unique patient encounters to ensure claims are paid accurately each and every time.
A team like ours at Zelis can provide the expertise needed to perform these complex validations efficiently and effectively. You can learn more about how Zelis uses DRG Validation here.
