Medicare reimbursement accuracy under the prospective payment system, 1985 to 1988

JAMA. 1992 Aug 19;268(7):896-9.


Background: Hospital reimbursement by Medicare's prospective payment system depends on accurate identification and coding of inpatients' diagnoses and procedures using the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). A previous study showed that 20.8% +/- 0.5% (mean +/- SE) of hospital bills for 1985 contained errors that changed their diagnosis related group (DRG) and that a significant 61.6% +/- 1.3% of errors overreimbursed the hospitals. This DRG "creep" improperly increased net reimbursement by 1.9%, +308 million when projected nationally. The present study updated our previous study with 1988 data.

Methods: The Office of Inspector General, US Department of Health and Human Services, obtained a simple random sample of 2451 hospital charts for Medicare discharges from 1988. The American Medical Record Association reabstracted the ICD-9-CM codes on a blinded basis, grouped them to DRGs, and determined the reasons for discrepancies.

Results: Coding errors declined to 14.7% +/- 0.7% in 1988, and a nonsignificant 50.7% +/- 2.6% of DRG errors overreimbursed the hospitals. Projected nationally, hospitals did not receive a significant overreimbursement. Physician misspecification of the narrative diagnoses underreimbursed the hospitals, while billing department resequencing overreimbursed them.

Conclusions: The attestation requirement may have deterred DRG creep due to attending physician upcoding, but the peer review organizations' sentinel effect and educational activities have not eliminated hospital resequencing.

MeSH terms

  • Abstracting and Indexing / standards
  • Aged
  • Aged, 80 and over
  • Diagnosis-Related Groups / classification*
  • Disease / classification
  • Female
  • Humans
  • Male
  • Medicare Part A / standards*
  • Medicare Part A / statistics & numerical data
  • Prospective Payment System / standards*
  • Quality Control
  • United States