Should DRG assignment be based on age?

The present Medicare Diagnosis Related Group (DRG) classification system contains 95 DRG pairs, where one DRG of the pair contains patients within a distinct diagnostic category who are under 70 years of age with no comorbidities or complications (CCs). The other DRG of the pair contains patients in the same diagnostic category who are over 69 or who have CCs. This study examines whether it is appropriate for reimbursement purposes to group those patients who are 70 years of age or older but have no CCs with patients who have CCs. Our findings show that age alone, in the absence of CCs, increases length of stay and cost of care only slightly. In fact, using only CCs as a classification variable reduces the within-group variance more than the present classification based on both age and CCs. Therefore, it is inappropriate to group Medicare patients who are older than 70 years of age without CCs with Medicare patients who have CCs.