Diagnosis Related Group (DRG) Codes

Diagnosis-related group (DRG) is a system which classifies hospital cases according to certain groups,also referred to as DRGs, which are expected to have similar hospital resource use (cost). They have been used in the United States since 1983. There is more than one DRG system being used in the United States, but only the MS-DRG (CMS-DRG) system is used by Medicare. A variety of other payers have adapted elements of the MS-DRG system including some Medicaid programs, workers compensation, and even some private payers.

FindACode uses the MS-DRG system as it relates to the Medicare Inpatient Prospective Payment System (IPPS).


The IPPS is a complex calculation in which begins with each case being categorized into a diagnosis-related group (DRG). Each DRG has a payment weight assigned to it. Payment weights are affected by factors such as:

  • geographic location (cost of living adjustment factor),
  • the number of low-income patients in that location (DSH adjustment),
  • whether that facility is a teaching facility (IME adjustment), and
  • if this is an outlier case (a particularly costly case).

DRGs are assigned by a "grouper" program which gathers claim information based on ICD diagnoses, procedures, age, sex, discharge status and the presence of complications or comorbidities. All these factors are used to determine the appropriate DRG on a case by case basis.

Sources: wikipedia | cms.hhs.gov

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