Revising diagnosis-related groups for neonates.

Groups of neonates who are usually treated at hospitals that provide specialized pediatric care are not adequately classified by the use of diagnosis-related groups (DRGs). Therefore, a set of revised DRGs, pediatric modified DRGs (PM-DRGs), have been developed. Use of PM-DRGs substantially improves the classification of neonates in the following ways: a single pediatric modified major diagnostic category has been defined to include only and all neonates (patients younger than 29 days of age when admitted to the hospital); deaths and transfers of newborns are no longer combined into a single group; birth weight (rather than diagnosis) is used as the primary variable to differentiate categories of neonates; and duration of mechanical ventilation, presence of major problems, and surgery are used to define specific PM-DRGs. A total of 46 PM-DRGs have been developed to replace the 7 DRGs for neonates. Based on a sample of discharged patients from 13 children's hospitals, the overall variance reduction in duration of stay for neonates using PM-DRGs was 38.7% compared with 20.4% for DRGs. Variance reduction for PM-DRGs was 45.9% compared with 16.3% for DRGs when operating cost per case was used instead of duration of stay. After removing outliers at 150 days, the duration of stay variance reduction was 53.3% vs 23.6%, respectively, and the operating cost variance reduction was 58.8% vs 17.8%, respectively.