Facility DRG Validation

Policy ID: FAC 111

Effective Date: January 01, 2027

Last Reviewed: June 26, 2026

Applies To: Migrated Commercial

This policy applies to inpatient hospital services reimbursed by All Patient Refined-Diagnosis Related Group (APR-DRG) payment methodologies.

Definitions

Code/Term

Code Description/Term Definition

All Patient Refined-Diagnosis Related Group (APR-DRG)

The APR-DRG classification system classifies patients into clinically meaningful groups that account for the severity of illness and risk of mortality. APR-DRG also help to provide an accurate and consistent way to compare provider performance. The Plan utilizes the APR-DRG classification system for all institutional inpatient acute medical surgical and behavioral health inpatient acute claims.

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.

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

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.

References

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

Cross References

Adm 129 - Correct Coding Guidelines
Fac 120 – Sepsis

Disclaimer

Your use of this Reimbursement Policy constitutes your agreement to be bound by and comply with the terms and conditions of the Reimbursement Policy Disclaimer.

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