Knowledge Base Article

As part of the Annual Proposed and Final Rule process, CMS evaluates diagnosis codes and their impact on hospital resource utilization. The following timeline of events highlights CMS efforts from FY 2008 to what was finalized in the FY 2025 IPPS Final Rule.

FY 2008 IPPS Final Rule

CMS described their process for establishing three different levels of CC severity into which diagnosis codes would be subdivided. The categorization of diagnoses as a MCC, a CC, or a Non-CC was accomplished by evaluating each diagnosis code to determine the extent to which its presence as a secondary diagnosis would result in increased hospital resource use.

FY 2020 IPPS Proposed Rule

CMS noted with the transition to ICD-10-CM and the significant changes to diagnosis codes since FY 2008, a new comprehensive analysis was warranted. At that time, CMS proposed changes to the severity level designation for 1,492 ICD-10-CM diagnosis codes. After consideration of comments received, the proposal was not finalized.

October 8, 2019

CMS held a listening session that included a review of the methodology CMS utilized to mathematically measure the impact on resource use.

FY 2021 IPPS Final Rule

CMS discussed their plan to continue a comprehensive CC/MCC analysis, using a combination of mathematical analysis of claims data and the application of the following nine guiding principles:

1. Represents end of life/near death or has reached an advanced stage associated with systemic physiologic decompensation and disability,
2. Denotes organ system instability or failure.
3. Involves a chronic illness with susceptibility to exacerbations or abrupt decline.
4. Serves as a marker for advanced disease states across multiple different comorbid conditions.
5. Reflects systemic impact.
6. Post-operative/post-procedure condition/complication impacting recovery.
7. Typically requires higher level of care (that is, intensive monitoring, greater number of caregivers, additional testing, intensive care unit care, extended length of stay).
8. Impedes patient cooperation or management of care or both.
9. Recent (in the last 10 years) changes in best practice, or in practice guidelines and review of the extent to which these changes have led to concomitant changes in expected resource use.

FY 2025 IPPS Final Rule

CMS indicates they have continued to solicit feedback since the nine guiding principles were first introduced in the FY 2021 IPPS Final Rule but have received no additional feedback or comments since then.

Effective October 1, 2024, CMS finalized using the nine guiding principles in combination with mathematical analysis of claims to determine the extent to which the presence of a diagnosis code as a secondary diagnosis results in increased hospital resource use.

FY 2025 ICD-10-CM Diagnosis Severity Changes

For FY 2025 there are:

• 4 additions to the MCC list, and
• 104 additions to the CC list.

Social Determinants of Health Z-Codes

For FY 2025, CMS finalized their proposal to change the DRG designation for seven SDOH-Z codes from non-cc to CC and includes:

• Z59.10 (Inadequate housing, unspecified)
• Z59.11 (Inadequate housing environmental temperature)
• Z59.12 (Inadequate housing utilities)
• Z59.19 (Other inadequate housing)
• Z59.811 (Housing instability, housed, with risk of homelessness)
• Z59.812 (Housing instability, housed, homelessness in past 12 months)
• Z59.819 (Housing instability, housed unspecified).

CMS notes in the final rule that “we hope and expect that this finalization will foster the increased documentation and reporting of the diagnosis codes describing social and economic circumstances and continue to serve as an example for providers that when they document and report Z codes, CMS can further examine the claims data and consider future changes to the designation of these codes when reported as a secondary diagnosis.”

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