Dig In to the IPPS/MS-DRG Alphabet Soup

IPPS and MS-DRG terminology

Inpatient facility coding and reimbursement come with their own Medicare language, and that includes a fair number of abbreviations. Here’s a beginning glossary to help next time you come across a jumble of letters related to inpatient coding. Hint: The terms are in alphabetical order, but if you’re new to this area, start by reading the DRG, MS-DRG, and IPPS entries.


DRG: Diagnosis-related group. Hospital discharges are assigned to DRGs. Each DRG groups similar diagnoses and procedures performed during patient stays. A patient’s gender, age, and discharge status may also affect DRG assignment. The idea is that cases in a particular DRG require similar amounts of inpatient resources and merit similar reimbursement. Also see MS-DRG.

DSH: Disproportionate share hospital. Hospitals that treat a high percentage of low income patients get an add-on payment called a DSH adjustment. 

ICD-10-CM: International Classification of Diseases, 10th Revision, Clinical Modification. ICD-10-CM classifies diagnoses and reasons for visits in all healthcare settings. ICD-10-CM is published by the United States and is based on the World Health Organization’s ICD-10 disease classification. An inpatient’s principal diagnosis and as many as 24 secondary diagnoses help determine DRG assignment.

ICD-10-PCS: International Classification of Diseases, 10th Revision, Procedure Coding System. This classification system applies to inpatient procedures. The United States publishes ICD-10-PCS. DRG assignment may be affected by as many as 25 procedures furnished during the patient’s stay.

IME: Indirect medical education. Approved teaching hospitals receive an add-on payment, called an IME adjustment.

IPPS: Inpatient prospective payment system. The IPPS is a payment system for the operating costs of acute care hospital inpatient stays. IPPS applies to Medicare Part A stays. Medicare Part A is hospital insurance. Under IPPS, each case is categorized into a DRG.

LoS: Length of stay. Each MS-DRG has a geometric mean LOS and arithmetic mean LOS. An arithmetic mean is what you get when you add together X numbers and divide the sum by X. Getting the geometric mean involves multiplying X numbers together and then getting the Xth root of the product. For instance, if you multiply two numbers together, you would then find the square root of the product. The effect of outliers is less in the geometric mean than in the arithmetic mean.

MCC/CC/Non-CC: Major Complication/Comorbidity. Complication/Comorbidity. Non-Complication/Comorbidity. The MS-DRG system has three levels of severity based on secondary diagnosis codes assigned. The basic idea is that a patient with a specific principal diagnosis may require a longer or more complicated inpatient stay if that patient also has certain secondary diagnoses. Consequently, the presence of these secondary conditions may affect a hospital’s reimbursement. MCC is the highest level of severity. CC is the next level down. Non-CC indicates a diagnosis doesn’t affect resource use significantly.

MDC: Major diagnostic category. ICD-10-CM codes are divided into MDCs. For instance, MDC 05 is Diseases & Disorders of the Circulatory System. A patient’s principal diagnosis determines the MDC. Each MDC crosses to a range of MS-DRGs.

MS-DRG: Medicare Severity DRGs. MS-DRG is the DRG system Medicare uses to account for Medicare patients’ illness severity and resource consumption. Each MS-DRG has a relative weight assigned, representing the average resources needed for cases in that DRG. The relative weight is one of the factors in determining payment under the IPPS. An MS-DRG Grouper can assist with determining which MS-DRG a case will fall into.

POA: Present on admission. The POA indicator identifies whether a condition was present when the inpatient admission order occurred. A condition that develops during admission is not marked as POA. Whether a condition is marked as POA may affect reimbursement. For instance, if a diagnosis is marked as not POA, Medicare won’t pay the CC/MCC DRG for selected hospital-acquired conditions.

What About You?

What abbreviations would you add to his list?


Deborah concentrates on coding and compliance for radiology and cardiology, including the tricky world of interventional procedures, as well as oncology and hematology. Since joining The Coding Institute in 2004, she’s also covered the ins and outs of coding for orthopedics, audiology, skilled nursing facilities (SNFs), and more.

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