Facility DRG Validation

Policy No: 111
Originally Created: 03/01/2017
Section: Facility
Last Reviewed: 02/01/2024
Last Revised: 02/01/2024
Approved: 02/08/2024
Effective: 03/01/2024

This policy applies to inpatient hospital services reimbursed by MS-DRG payment methodologies.


Additional (Other) Diagnoses
Additional conditions that affect patient care in terms of requiring: clinical evaluation; or therapeutic treatment; or diagnostic procedures; or extended length of hospital stay; or increased nursing care and/or monitoring.

The Uniform Hospital Discharge Data Set (UHDDS) defines Other Diagnoses as "all conditions that coexist at the time of admission, that develop subsequently, or that affect the treatment received and/or the length of stay. Diagnoses that relate to an earlier episode which have no bearing on the current hospital stay are to be excluded."

International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM)
A morbidity classification system for classifying diagnoses and reason for visits in all health care settings for the purpose of coding and reporting.

Major Complication or Comorbidity (MCC) and Complication or Comorbidity (CC)
The severity of the illness or condition is determined by the presence or absence of MCCs and CCs. The presence of these will impact the DRG assignment and subsequent hospital payment.

Medicare Severity Diagnosis Related Groups (MS-DRG or DRG)
A statistical system of classifying any inpatient stay into groups for the purposes of payment. DRGs are assigned by a "grouper" program based on ICD (International Classification of Diseases) diagnoses, procedures, age, sex, discharge status, and the presence of complications or comorbidities.

Present on Admission (POA) Indicator
Condition(s) present at the time the order for inpatient admission occurs. The POA indicator is intended to differentiate conditions present at the time of admission from those conditions that develop during the inpatient admission.

Principal Diagnosis
The condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.

Policy Statement

The DRG and principal diagnosis are confirmed upon discharge, not based on the clinical suspicion at the time of admission. While specific diagnosis codes should be reported when they are supported by the available medical record documentation and clinical knowledge of the patient's health condition, there are instances when signs/symptoms or unspecified codes are the best choices for accurately reflecting the healthcare encounter.

Clinical findings and physician documentation in the medical record must support all diagnoses and procedures billed including the MCC and CC that would affect the billing.

Our health plan will not allow reimbursement for diagnoses, procedures, MCCs or CCs that are not clearly documented in the medical record.

DRG Validation Audits:
DRG Validation Audits are conducted by our health plan to confirm DRG assignment and accuracy of payment. DRG validation involves review of claim information (including but not limited to all diagnoses, procedure codes, revenue codes) and/or medical record documentation to determine correct coding on a claim submission and in accordance with industry coding standards as outlined by the Official Coding Guidelines, the applicable ICD Coding Manual, UHDDS, and/or Coding Clinics.

DRG Validation Audits include, but are not limited to the following:

  • Verification of the diagnostic code assignments
  • Verification of the procedural code assignments
  • Verification of present on admission indicator assignments
  • Verification of the sequencing of codes
  • Verification of DRG grouping assignment and associated payment
  • Verification of the MCC and CC when reported

DRG Validation audits will be performed using the medical record documentation available at the time of audit. Audit findings will communicate the official industry sourced documents, including Official Coding Guidelines, the applicable ICD Coding Manual, UHDDS guidelines and Coding Clinics.

DRG Validation Audits may result in revisions to the diagnosis codes and/or procedural codes. These revisions may result in a change in the DRG assignment.


Centers for Medicare & Medicaid Services (CMS), ICD-10 Official Guidelines for Coding and Reporting.

Centers for Medicare & Medicaid Services (CMS), Medicare Claims Processing Manual, Chapter 23 - Fee Schedule Administration and Coding Requirements

Treatment of Adult Sepsis, Medical Policy, Medicine 172


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