The risk of upcoding in casemix systems: A comparative study

With the introduction of a diagnosis related group (DRG) classification system in the Netherlands in 2005 it has become relevant to investigate the risk of upcoding. The problem of upcoding in the US casemix system is substantial. In 2004, the US Centres for Medicare and Medicaid estimated that the total number of improper Medicare payments for the Prospective Payment system for acute inpatient care (both short term and long term) amounted to US$ 4.8 billion (5.2%). By comparing the casemix systems in the US, Australian and Dutch healthcare systems, this article illustrates why certain casemix systems are more open to the risk of upcoding than other systems. This study identifies various market, control and casemix characteristics determining the weaknesses of a casemix reimbursement system to upcoding. It can be concluded that fewer opportunities for upcoding occur in casemix systems that do not allow for-profit ownership and in which the coder's salary does not depend on the outcome of the classification process. In addition, casemix systems in which the first point in time of registration is at the beginning of the care process and in which there are a limited number of occasions to alter the registration are less vulnerable to the risk of upcoding. Finally, the risk of upcoding is smaller in casemix systems that use classification criteria that are medically meaningful and aligned with clinical practice. Comparing the US, Australian and Dutch systems the following conclusions can be drawn. Given the combined occurrences of for-profit hospitals and the use of the secondary diagnosis criterion to classify DRGs, the US casemix system tends to be more open to upcoding than the Australian system. The strength of the Dutch system is related to the detailed classification scheme, using medically meaningful classification criteria. Nevertheless, the detailed classification scheme also causes a weakness, because of its increased complexity compared with the US and Australian system. It is recommended that researchers and policy makers carefully consider all relevant market, control and casemix characteristics when developing and restructuring casemix reimbursement systems.