DRG Diagnosis-Related Group (MS-DRG)
A classification that groups inpatient hospital stays with similar clinical characteristics and resource use; Medicare pays most acute inpatient stays by MS-DRG.
A diagnosis-related group (DRG) places an inpatient hospital stay into one of a finite number of groups based on the principal diagnosis, secondary diagnoses, procedures, discharge status and certain demographics. Medicare uses Medicare Severity DRGs (MS-DRGs) under the Inpatient Prospective Payment System (IPPS).
How MS-DRGs work
- The principal diagnosis usually determines the Major Diagnostic Category (MDC).
- Procedures (ICD-10-PCS) may move the case into a surgical DRG.
- Secondary diagnoses designated as a CC (complication or comorbidity) or MCC (major CC) can move the case into a higher-severity DRG within a family — commonly a three-tier structure: without CC/MCC, with CC, with MCC.
- Each MS-DRG has a relative weight. Payment is roughly the relative weight multiplied by the hospital's base rate, with adjustments.
Why DRGs matter to coders
Small differences in documentation and code selection — principal diagnosis sequencing, a CC or MCC, or a procedure code — can change the DRG. That is why DRG validation and clinical validation are frequent audit targets. CMS updates MS-DRG definitions and weights every fiscal year in the IPPS final rule, effective October 1.