Patient in a hospital bed with IV drip

Being complacent is not being compliant!

Have you noticed the ongoing compliance risk warning that the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) has published regarding Medicare-Severity Diagnostic Related Groups (MS-DRGs)? This, of course, can be directly linked to the principal diagnosis code selection made for the inpatient encounter (admission/discharge).

Identifying the “principal diagnosis” can be challenging even for the experienced and expert coding professional. The Official Guidelines for Coding and Reporting are essential for all coding professionals, no matter what healthcare setting(s) you work in.

There are four sections to the Official Guidelines for Coding and Reporting. Section I contains the coding classification conventions, general guidelines, and chapter-specific guidelines – this section applies to all healthcare settings. Section II is “Selection of the Principal Diagnosis,” which applies to the inpatient setting; Section III contains the guidelines for “Selection of Additional diagnosis” (often we refer to this as the secondary diagnosis guidelines for the inpatient setting); and Section IV is for outpatient hospital and physician settings.

Within Section II, Selection of Principal Diagnosis, we have two primary and very important instructions that must be followed: a) the circumstances of inpatient admission always govern the selection of principal diagnosis; and b) the principal diagnosis is defined in the Uniform Hospital Discharge Data Set (UHDDS) as “that condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.” These two guidelines (rules) really drive the accuracy of the principal diagnosis.

Other Section II principal diagnosis selection guidelines cover the following:

  1. Codes for symptoms, signs, and ill-defined conditions;
  2. Two or more interrelated conditions, each potentially meeting the definition for principal diagnosis;
  3. Two or more diagnoses that equally meet the definition for principal diagnosis;
  4. Two or more comparative or contrasting conditions;
  5. A symptom(s) followed by contrasting/comparative diagnoses (this was deleted effective October 2014);
  6. Original treatment plan not carried out;
  7. Complications of surgery and other medical care;
  8. Uncertain Diagnosis;
  9. Admission from observation unit and admission following medical observation;
  10. Admission following post-operative observation;
  11. Admission from outpatient surgery; and
  12. Admissions/encounters for rehabilitation.

The principal diagnosis is the single most changed code in third-party audits, and it defines the entire subsequent coding structure (and ultimately, the inpatient MS-DRG payment). This means that in order to achieve coding accuracy, capture severity and acuity, obtain the most optimal reimbursement, and achieve the highest levels of compliance, the accuracy of the determined principal diagnosis is vital.

The circumstances of admission are essential to read over carefully in the medical record. Again, the principal diagnosis is defined in the Uniform Hospital Discharge Data Set (UHDDS) as “that condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.” Once the circumstances are identified, then apply the principal diagnosis definition to the encounter.

In a February 2021 report, the OIG identified some MS-DRGs as carrying high risk. This report was titled “Trend Toward More Expensive Inpatient Hospital Stays in Medicare Emerged Before COVID-19 and Warrants Further Scrutiny.” We need to take note of this report and be auditing regularly our own inpatient encounters for accuracy. Another key factor to focus on is the length of stay (LOS), as each MS-DRG has a designated length of stay, and the OIG did find low LOS in high-paying MS-DRGs, which raised red flags. Compare the actual LOS to the geometric LOS of the MS-DRG to help identify any potential encounters that may represent a compliance risk.

Some specific MS-DRGs that are frequent compliance targets include the following:

  • DRG 870 SEPTICEMIA OR SEVERE SEPSIS WITH MV >96 HOURS;
  • DRG 871 SEPTICEMIA OR SEVERE SEPSIS WITHOUT MV >96 HOURS WITH MCC;
  • DRG 872 SEPTICEMIA OR SEVERE SEPSIS WITHOUT MV >96 HOURS WITHOUT MCC;
  • DRG 192 SIMPLE PNEUMONIA AND PLEURISY WITH MCC;
  • DRG 193 SIMPLE PNEUMONIA AND PLEURISY WITH CC;
  • DRG 194 SIMPLE PNEUMONIA AND PLEURISY WITHOUT CC/MCC;
  • 981 EXTENSIVE O.R. PROCEDURES UNRELATED TO PRINCIPAL DIAGNOSIS WITH MCC;
  • 982 EXTENSIVE O.R. PROCEDURES UNRELATED TO PRINCIPAL DIAGNOSIS WITH CC;
  • 983 EXTENSIVE O.R. PROCEDURES UNRELATED TO PRINCIPAL DIAGNOSIS WITHOUT CC/MCC;
  • 987 NON-EXTENSIVE O.R. PROCEDURES UNRELATED TO PRINCIPAL DIAGNOSIS WITH MCC;
  • 988  NON-EXTENSIVE O.R. PROCEDURES UNRELATED TO PRINCIPAL DIAGNOSIS WITH CC; and
  • 989  NON-EXTENSIVE O.R. PROCEDURES UNRELATED TO PRINCIPAL DIAGNOSIS WITHOUT CC/MCC.


In addition, look closely at MS-DRGs with a single CC/MCC assigned, as this has also been an area of compliance risk. You can access this OIG report at: https://oig.hhs.gov/oei/reports/OEI-02-18-00380.pdf

Coding professionals should review and understand diagnosis code sequencing guidelines. For example, there are several guidelines related to the sequencing of respiratory failure as the principal diagnosis:

  • Respiratory failure and other acute conditions (acute respiratory failure and acute MI);
  • Respiratory failure and another respiratory condition;
  • Respiratory failure and a non-respiratory condition; and
  • Chapter-specific guidelines including OB, HIV, newborns, poisoning, and overdose.

Moving the diagnosis code from a principal to a secondary diagnosis code will impact the MS-DRG and reimbursement. If there is unclear diagnostic information, this will mark a query opportunity for clarification. Ensure that the query process is timely and appropriate, following the American Health Information Management Association/Association of Clinical Documentation Integrity Specialists (AHIMA/ACDIS) 2019 Practice Brief on querying.

Coded data goes farther, and we do more with it than ever before, making it an imperative that health information management (HIM) professionals stay abreast of many rapid changes in the coding guidelines and alpha and tabular instructions. Complete documentation and coding are linked to the value of data in terms of patient care, quality, severity of illness (SOI), and risk of mortality (ROM). Conduct regular audits and provide education; these are best practices across healthcare settings, but certainly in light of the above MS-DRG compliance risks. As part of the audit process, ensure that there is a “rebilling” or refunding step included for any overpayments identified.

First and foremost, be sure that your coding staff is striving for principal diagnosis accuracy. Always follow the Official Guidelines for Coding and Reporting, always follow American Hospital Association (AHA) Coding Clinic advice, and always have supporting clinical documentation for the ICD-10-CM code(s). Being proactive is better than being reactive, when it comes to compliance and diminishing risk.

I often remind fellow HIM, coding, and CDI professionals that yes, mistakes happen, but being complacent is not being compliant!

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