MSDRGs

Medicare Severity-Diagnosis Related Groups (MS-DRGs) are a patient classification system used in the United States to determine payments for inpatient hospital stays under the Medicare program. They refine the original Diagnosis-Related Groups (DRGs) by incorporating the severity of illness and the presence of complications or comorbidities. The goal is to classify cases with similar clinical characteristics and resource use for more accurate payment.

Hospitals are assigned an MS-DRG based on factors such as the principal diagnosis, procedures performed, patient age and discharge status, and any admitted comorbidities. Each MS-DRG carries a base payment weight and is further stratified by severity: no CC/MCC, with a CC, or with an MCC (major complication or comorbidity). These severity levels adjust the payment to reflect expected resource needs. Payments are set as a fixed rate per stay, adjusted for geographic wage differences and hospital-specific factors.

MS-DRGs were introduced by the Centers for Medicare & Medicaid Services in the mid-2000s and implemented in 2007 as part of the inpatient prospective payment system. The system is widely used by Medicare and influences how many private payers structure inpatient payments. Other DRG variants—such as All Patient Refined DRGs (APR-DRGs)—also exist and are used by some payers.

Critics point to potential upcoding of severity, coding burden on hospitals, and limitations in capturing patient complexity beyond coded diagnoses.