Shifting DRGs ‘to the left’

Aug 16, 2023

DRGs play an important role in the healthcare landscape; their significance, challenges, and potential to enhance revenue integrity programs in an ever-evolving market are unlike other patient categorization systems. How a payer approaches DRGs can reduce administrative burdens and refine provider relationships, and when combined with pre-pay claim review tools, they can be transformative to the overall revenue cycle.


The DRG system was developed in the 1980s and uses patient factors to determine healthcare payment, finding a balance between cost control and care quality. Today, DRGs represent over 70% of all inpatient hospital reimbursements across various healthcare business lines. DRG overpayments can exceed millions of dollars per year due to noncompliance and billing errors. The rise of the Affordable Care Act and numerous government mandates and regulatory guidelines have placed pressure on both healthcare sides, challenging health plans and health systems to strengthen their billing and reimbursement practices.

However, this narrative of financial optimization navigates complexities, as the integration of clinical expertise and coding precision is pivotal for effective DRG claim review. Payment integrity efforts using DRG business processes have been recognized as a critical component in developing a strong financial strategy and achieving success in the market. A DRG review program is essential for a fully formed revenue integrity program.


DRG claim review requires both coding and clinical experience because the significance of coded data extends beyond statistical reporting and DRGs—it becomes more challenging to determine when a condition meets the threshold for reporting accurately, depending on the clinical context. However, hiring individuals with these skills is expensive due to difficulties in recruiting and retaining clinical resources caused by increased demand and competition.

Effective claim selection is important for ensuring proper utilization of scarce clinical and coding resources and reducing provider network abrasion. To optimize DRG claim review, health plans need to find the goldilocks of claims with the highest degree of error and highest potential savings per review. The utilization of sophisticated analytics tools can aid in identifying problematic claims, reducing administrative costs, and improving provider relationships.

Shifting DRG Reviews to the Left

Shifting from post-pay to pre-pay review programs can help minimize payment delays and provider abrasion.

Pending claims and the time factor

Under the traditional post-pay review process, claims are paid before they are subject to audits or reviews, which can result in costly recovery and reconciliation efforts. In contrast, a pre-pay review process is proactively identifying any coding or documentation errors upfront, which reduces the likelihood of overpayment or the need for expensive and often unwelcome recovery efforts later on. By resolving payment and documentation issues prior to the initial payment, both health plans and systems can reduce administrative costs.

Reduce provider abrasion

Transitioning to a pre-pay review model can significantly reduce provider abrasion, which refers to the strain and frustration experienced by healthcare providers due to payment delays, denials, and the subsequent administrative cost burden. By proactively addressing any coding or documentation concerns during the review process, providers can receive accurate reimbursements in a timely manner, fostering stronger provider-payer relationships and minimizing friction.

Reduce admin costs from recovery efforts

Implementing a pre-pay review program can yield substantial cost savings for healthcare organizations. By identifying and rectifying errors before payment, organizations can avoid the cumbersome and expensive process of recovering overpayments and the shared costs of reconciliation. The proactive nature of pre-pay reviews allows for prompt resolution of discrepancies, optimizing financial outcomes, and reducing administrative burdens associated with conventional recovery efforts.

Payment Policy Review & Reviewing Existing Contracts

Health plans are regularly assessing and updating their existing payment policies and procedures to ensure they’re aligned with industry standards, regulatory requirements, and the unique needs of the organization. This is particularly meaningful in a DRG context as it directly impacts reimbursement accuracy and financial stability. Assessing existing provider contracts involves a detailed analysis of the contractual terms, payment methodologies, and associated timelines. By closely scrutinizing contracts, health plans can identify gaps or inconsistencies within payment policies and procedures. A comprehensive review allows for a thorough understanding of the challenges and opportunities associated with transitioning to a pre-pay DRG review program.

Consider Roll-Out Plan & Provider Communication

A successful transition to a pre-pay review program requires a well-executed roll-out plan and provider communication. Roll-out plans should outline key milestones, timelines, and responsible parties involved in the implementation process. It is essential to allocate sufficient time for training and education to ensure health systems understand the new payment policies and procedures. Clear and consistent communication channels further being able to address concerns or questions from providers, fostering a collaborative approach to the transition.

The concept of shifting DRG reviews to the left is multifaceted and can bring challenges; however, technology offers a pathway to revolutionize the current review landscape. Technology is the pivotal solution to these challenges, and its implementation should be a strategic imperative for health systems. By leveraging advanced algorithms and automated systems, a technology-driven review process presents an unparalleled opportunity to proactively address coding and documentation errors. The integration of technology into the review process ensures accuracy from the onset, mitigating the potential for overpayments and reducing the necessity of resource-intensive recovery efforts. It is the key to identifying and resolving payment and documentation discrepancies and, streamlining administrative functions—fostering efficient financial workflows.

How TREND Can Help

CAVO® is a revolutionary technology platform that supports various complex clinical claims review processes performed by health plans and services companies. CAVO empowers highly skilled clinical and coding resources with AI-driven functionality that shifts the focus from “low value”  tasks and requirements such as document access, search, analysis, and determination support within medical records and other unstructured data to “high value” tasks and requirements such as validation and final determination. The technology enables clinical and coding reviewers to easily access and structure medical records, itemized bills, and additional clinical data efficiently, consistently, cost-effectively, and profitably.

With over one million completed case reviews, CAVO delivers technology proven to scale up your medical record reviews and increase your team’s productivity by 300%-500%.