Determining the MS-DRG – Clinical Documentation Improvement

By AGS Health

September 26, 2022

Many Clinical Documentation Improvement (CDI) specialists. with clinical backgrounds are encoder-dependent, having been taught to "code" using an encoder and create a working MS-DRG using grouper software. Many coders also rely on the encoder. However, CDI specialists and coders should also understand how to manually assign an MS-DRG.

The basic steps in assigning an MS-DRG are as follows:

  • Locate all reportable diagnoses in the medical record and assign them an ICD code.
  • Determine the primary diagnosis (the condition after a study determined to be chiefly responsible for occasioning the admission). The remaining diagnoses are secondary diagnoses, some of which CMS may classify as CC or MCC diagnoses.
  • Scan the MS-DRGs associated with the listed pages to see which applies to the particular scenario, using the DRG Expert's Alphabetic Index of diagnoses to identify the base/medical MS-DRG, noting its Major Diagnostic Category (MDC)/body system. The MDC is necessary to assign the surgical MS-DRG when applicable.
  • Identify all procedures that must be reported and their procedure codes (ICD-9-CM Volume 3 until we transition to ICD-10-PCS).

The Uniform Hospital Discharge Data Set (UHDDS) defines reportable diagnoses and procedures. Diagnoses definitions are well-known among coders and CDI specialists, but coders tend to be less familiar with procedure definitions. You should only report significant procedures. According to UHDDS, a significant procedure is either:

  • Surgical in nature
  • Carries a procedural risk
  • Carries an anesthetic risk
  • Requires specialized training

In addition, UHDDS defines the principal procedure as:

  • One that was performed for definitive treatment rather than a diagnostic or exploratory purpose or was required to address a complication
  • If two procedures could be principal, then choose the one most related to the principal diagnosis

Because not all procedures affect the MS-DRG, the UHDDS definitions of significant procedures are handy. Some procedures will have no effect on the MS-DRG, while others will change the base medical MS-DRG or transfer the case to a surgical MS-DRG.

Diagnostic procedures are less likely to impact MS-DRG assignment because they are typically performed in the outpatient setting, so they are less likely to be the principal procedure. Also, the principal procedure is usually linked to the primary diagnosis, implying that they are both located in the same MDC/body system. ICD-10-PCS has specific guidelines regarding the assignment of the principal procedure.

If a procedure was performed, determine if it is significant:

  • If there are multiple important procedures, determine the principal procedure
  • Assign the procedure code(s) and use the numeric index in the DRG Expert to see if the code is listed. If the code isn’t in the DRG Expert index of procedures, is it because of one of the two following reasons:
    • It is not a “reimbursable” procedure (i.e., one that will not affect the MS-DRG assignment)
    • It is a major operating room procedure
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AGS Health


AGS Health is more than a revenue cycle management company–we’re a strategic partner for growth. By blending technologies, services, and expert support, AGS Health partners with leading healthcare organizations across the US to deliver tailored solutions that solve the unique needs and challenges of each provider’s revenue cycle operations. The company leverages the latest advancements in automation, process excellence, security, and problem-solving through the use of technology and analytics–all made possible with college-educated, trained RCM experts. AGS Health employs more than 10,000 team members globally and partners with more than 100 clients across a variety of care settings, specialties, and billing systems.

Related resources

RCM Maturity Framework A 4-Stage Journey to Digital
The RCM Maturity Framework: A Path to Digital Transformation and Operational Excellence

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