Changes in Medicare Diagnosis Related Group (DRG) system for primary and revision hip and knee replacements and their implications on hospital reimbursement

Sunny H Kim, John Meehan, Amir A. Jamali

Research output: Contribution to journalArticle

1 Scopus citations


Medicare provides payments to hospitals for services they have provided through a patient classification system of Diagnosis Related Group (DRG). To achieve more equitable reimbursement, Medicare has made substantial changes to the DRG system for hip and knee replacements in recent years. The objective of this paper was to describe the implications of the changes in the Medicare coding system on hospital reimbursement for these procedures. Until 2005, the DRG code was the same for primary and revision hip and knee replacements. Because revisions are more costly procedures than primary replacements, Medicare implemented two separate DRG codes for primary and revision surgeries. In 2006, the amount of reimbursement for a revision procedure was approximately 26% higher than the amount of reimbursement for a primary replacement at the same facility. Beginning in fiscal year 2008, a newer Medicare Severity (MS) DRG system was placed in use. Under the newer MS-DRG system, in addition to the replacement type (primary or revision), Medicare now considers the severity of illness in its reimbursement policies. Hospitals treating patients with secondary diagnoses that drive up the cost of care are compensated at increased rates. For a given facility, the amount of reimbursement for a primary replacement would be approximately 64% higher for the sicker patient. Reimbursement is expected to be shifted to hospitals serving and documenting more severely ill patients. For the sustainability of hospital care in the hospitals taking care of the most severe cases, quality clinician documentation is more important than ever.

Original languageEnglish (US)
Pages (from-to)120-125
Number of pages6
JournalCurrent Orthopaedic Practice
Issue number2
StatePublished - Mar 2010



  • Medicare
  • Reimbursement
  • Total hip arthroplasty
  • Total knee arthroplasty

ASJC Scopus subject areas

  • Orthopedics and Sports Medicine

Cite this