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MS-DRG changes in 2021 [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by Mary Devine, Senior Director of Revenue Cycle services at BESLER, to discuss changes to MS-DRGs in 2021.  

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Highlights of this episode include:

  • A review of the new DRGs that were added for 2021.
  • Notable additions in DRGs related to CAR T-cell immunotherapies and hip replacements.
  • What big changes are coming as a result of the final rule?
  • What changes are being made that affect the Transfer DRG rule
  • And more…

To watch our webinar with Mary Devine on this subject titled “MS-DRG changes in 2021 – a look ahead” – CLICK HERE

To view the transcript of this podcast episode, click HERE

MS-DRG Changes in 2021 – A look ahead

Annually, CMS proposes changes to the Inpatient Prospective Payment System (IPPS) rules that can impact how IPPS facilities are reimbursed from Medicare – either positively or negatively. 

As always, CMS has published the final rule in early September and is effective on October 1, 2020.  The final rule is based on the proposed rule and any updates due to comments provided.  The final rule provides updates to reimbursement, MS-DRGs and ICD-10 coding.  The changes are based on the review of the most recent full year Medpar data.  This provides an update on the MS-DRGs, especially those impacted by the transfer rule.

Below is a summary of the DRG changes, highlights and DRGs impacted by the rule. 

MS-DRG changes in 2020 – Recap

  • There was an estimated $3.4 billion increase in CMS payments, represents a 3.1% increase over 2019
  • MS-DRGs remains constant at 761
  • 28 DRGs were deleted
    • 207, 291, 296, 870, 014, 034-036, 176, 216-221, 228, 229, 273, 274, 548, 549, 550, 459, 460, 691, 692, 769, 776
  • 28 DRGs were added
    • 003, 016, 017, 037, 038, 039,175, 266, 267, 319, 320, 260, 261, 262, 485, 486, 487, 456, 457, 458, 693, 694, 817, 818, 819, 831, 832, 833
  • 252 ICD-10-CM (diagnosis)codes added
  • 1,660 ICD-10-PCS (procedure) codes deleted

For 2020, there are only 278 DRGs that will be impacted by the transfer policy.  This represents a drop in 2 DRGs that will be impacted by the rule.  MS-DRGs 273 and 274 are currently subject to the post-acute care transfer policy and are being removed from the list for 2020. 

2021 MS-DRG and ICD-10 Final Rule Changes

The 2021 IPPS final rule issued in September suggests:

  • The review of the classifications and changes to MS-DRGs is for both IPPS and LTAC PPS facilities. The complexity the ICD-10 codes has brought to the annual review has allowed for comments to extend through November 1.
  • The new FY 2021 ICD–10 MS–DRG GROUPER and Medicare Code Editor is available and is version 38 at CMS at:
  • There are 767 DRGs in 2021, up from 761 in 2020
  • 42 DRGs will result in an add-on payment to the DRG
  • The New DRGs are: 018, 019, 551, 552, 140, 141, 142 143, 144, 145, 650 and 651
  • The deleted DRGs are: 129, 130, 131, 132, 133, and 134
  • 446 new ICD-10 diagnosis codes added
  • 63 ICD-10 diagnosis codes were deleted
  • 1,177 new ICD-10 procedure codes added
  • No ICD-10 procedure codes were eliminated
  • There was no addition of a DRG specific to COVID-19

One of the biggest changes is regrouping 014, 016, 017, bone marrow transplants from surgical to medical.  It was determined bone marrow transplants are like a blood transfusion and do not utilize OR resources, it is a non-OR procedure.  This was proposed and changed based on the resource consumption during the procedures. 

In addition, procedures involving the CAR T-cell therapies are coded with codes XW033C3 and XW043C3.  This would group with MS-DRG 016.  In 2020, this would trigger an add-on payment for the costly CAR T-cell product.  In 2021, the add-on payment is eliminated.  It was then proposed this be a new DRG.  The new DRGs are 018 and 019. 

It was proposed that revise MS-DRGs 266 and 267 (Endovascular Cardiac Valve Replacement and Supplement Procedures with and without MCC, respectively) be combined to allow the removal of the level of cardiac failure.  It was proposed the cardiac valve can be replaced due to either exacerbation or chronic heart failure.  This was denied and the two DRGs will remain separate and allow the level of cardiac failure coding. 

One other highlight of the MS-DRG changes is around hip and knee joint replacements.  It was proposed to restructure the MS-DRGs for total joint arthroplasty that utilize an oxidized zirconium bearing surface implant in total hip replacement and total knee replacement procedures. The reason it was proposed is because of the varying outcomes of this type of joint implant.  It was proposed patients with that type of implant be broken out into separate DRGs to track outcomes.  The current DRG are 469 and 470, Total hip or knee replacement with MCC/CCs and without MCC/CCs respectively.  In 2021, 521 and 522 are being added for hip replacement due to hip fracture with MCC/CCs and without MCC/CCs respectively.  Through the medpar data analysis it was determined the presence of a fracture is what determined the outcomes. 

MS-DRG changes affecting the Transfer DRG Rule 

As a refresher, the transfer rule policy in § 412.4(f) states when a patient is transferred and the length of stay is less than the geometric mean length of stay for the MS-DRG assigned, the transferring hospital is largely paid based on a graduated per diem rate for each day of stay up to the full DRG payment if the patient had been discharged and not transferred. 

Each year CMS reviews the most recent complete year of Medpar data to evaluate whether a DRG should be impacted by the rule.  The initial DRGs are from the 2004 grouper listing.  Each year new DRGs are added based on the review of the most recent medpar data. If the MS-DRG’s total number of discharges to post-acute care equals or exceeds the 55th percentile for all MS-DRGs and the proportion of short-stay discharges to post-acute care to total discharges in the MS-DRG exceeds the 55th percentile for all MS-DRGs, CMS will apply the post-acute care transfer policy to that DRG and to any other one that shares the same base MS-DRG.  The selection process of the DRGs is not the important piece.  Knowing which were selected to be impacted by the rule is much more important. Additionally, DRGs are removed based on changes. 

In 2021, there are now 280 DRGs impacted by the rule.  The only additions are 521 and 522, discussed above.  DRGs 469 and 470 are currently impacted by the rule.  The two new codes for Hip replacement due to hip fracture, would be impacted by the rule as well. 

In summary, there is no other changes to the transfer rule for 2021.  The same 9 discharge status codes from 2020 remain as transfer discharge status codes for 2021.  Always keep in mind, a discharge status code of 02, discharge to acute facility, is not limited to the 280 DRGs impacted by the rule.  All inpatient discharges with a discharge status code of 02 are impacted by the rule 100% of the time.

Transcript for “MS-DRG changes in 2021”:

Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. If you enjoy the podcast, I invite you to head up to Apple Podcasts, rate us five stars and leave a positive review. This will help new listeners in the healthcare space find the show. And with that we’ll move onto today’s program. Annually CMS proposes changes to the inpatient prospective payment system rules that can impact how IPPS facilities are reimbursed for Medicare, either positively or negatively. The final rule provides updates to reimbursements, driven by MS-DRGs and ICD-10 coding. To provide an update on changes to MS-DRGs for the coming year, I’m joined by Mary Devine, Senior Director of Revenue Cycle Services at BESLER. Mary, welcome back to the show.

Mary Devine: Mike, thanks for having me.

Mike: Mary, how many DRGs will there be in 2021?

Mary: So in 2021, Mike, it goes up from 761, which was in 2020, up to 767. And that is really with additions and deletions. And there were a net of six new DRGs that they added for 2021 that went into effect on 10/1/20.

Mike: So let’s talk about some of those additions, particularly. Can you summarize the additions for us this year?

Mary: Absolutely. So there were 12 new DRGs that were added, and there were 2 added for the CAR T-cell immunotherapies. And then they really did 2 new DRGs relating to hip replacements. And then, finally, there were head-and-neck and ear-nose DRGs that were new, but they deleted the older ones. And so we have a net of 6 new DRGs for the new year.

Mike: And were there any notable deletions?

Mary: The only notable deletion was relating to all the head-and-neck. All the new ones that they put on, they deleted the old ones. So that’s about it.

Mike: Got it. Mary, what would you say are some of the biggest changes that are coming as a result of the final rule?

Mary: So first, I want to talk about the bone marrow transplants. That is for DRGs 14, 16, and 17. Those, in the past, had been surgical DRGs, and those were moved to medical DRGs. And really, the position and the comment was due to the fact that you would liken a bone marrow transplant to a blood transfusion, and it really isn’t surgical. And they did that based on the resources that it’s consuming during the process. So that went, again, from a surgical to a medical.

And then the next big one – and I kind of mentioned it briefly because they added in DRGs for it – is the CAR T-cell therapies, which is the chimeric antigen receptor. And it really is T-cells that are genetically engineered to produce an artificial T-cell receptor. And this is used for immunotherapy that fights off cancer. And previously, when you utilized one of the two ICD-10 codes, indicating that you were going to be administering this, you would get an add-on payment. And starting in 2021, that add-on payment goes away. And then they wanted to propose that they add a new DRG. And that, in fact, happened with the DRG 18.

And then, finally, and I’ll mention it briefly, is the add-on of the two new DRGs as it relates to the hip replacements. And there was some discussion that, based on the type of material the hip replacements used, that would dictate recovery, the length of recovery. And they kind of disagreed with that. And what they wanted to do is they really wanted to track whether the replacement was due to a fracture or not. So they added in 550 and 551, which is hip replacement due to a fracture with and without complications.

Mike: Okay. Are there any changes affecting the transfer rule?

Mary: This year there are 280 DRGs now impacted by the rule. That was up from last year which was 278. 278 was the first time that the number of DRGs had dropped in quite some time, but it bounced right back to 280. And that is due to the addition of the two hip replacements. 467 and 470 are already impacted by the rule. They are the original hip replacements. And now you have the hip replacements due to fracture. And those two are also impacted by the rule. And that’s the only change for the rule. There’s still nine discharge status codes impacted by the rule. And that’s it for the changes to the transfer rule.

Mike: Okay. For those in our audience, Mary just completed a very comprehensive webinar that goes a lot deeper on this content and that recording is now available on our website at So just head up there, go to the Insights button, look for Revenue Cycle Insights and you can watch that entire webinar which covers this content and a whole lot more. Mary, thanks for coming back to the show today and giving us an update on the DRGs affected in 2021.

Mary: Thank you.

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