What Are DRG and Trim Points?

In healthcare, the term "DRG" refers to diagnosis related groups. Such groups help establish the payment policies the care facility will follow for an individual patient for the condition, demographics and procedures required. DRG payments are then adjusted using trim points. The average cost or length of hospital stay for all patients in a particular DRG serve as a basis for trim points.

Diagnosis Related Groups

• Diagnosis related groups are groups of patients with similar clinical characteristics and costs. Factors such as diagnosis, age, surgical procedures and other health-related issues determine a patient's DRG assignment. Insurance providers, including Medicare, establish payment plans based off the average for all patients within a DRG. Hospital bills include DRG information to allow insurance providers to decide their portions of the payment based on the average cost of patients with similar characteristics. The patient receives the remainder of the bill.

Purpose of DRGs

• DRGs work as a shorthand in relating the information of the patient. Generalizing the details of the patient into a larger group speeds up the process of payment. The DRG payment is modified by "trimming" the cost to portray the exact procedures and payments needed for that particular patient more accurately.

Trim Points

• Although a patient may be assigned to a certain DRG, it doesn't mean that their individual treatment fits with the average payment of others within that group. Trims are an option applied to adjust the charge or the stay of a specific patient within a DRG. The term "charge trim point" refers to a payment number two standard deviations above the arithmetic mean of all patients within a DRG. "Length of stay trim point" is a length of stay for an individual patient that is two standard deviations above the average length of stay for all patients within the DRG. Finally, these are added together to establish the "trim points" for that individual patient. These points are used to portray the payments needed for the care of that particular patient more accurately.

Understanding Trim Points

• Trim points are used to adjust medical payments for outliers from the mean of the DRG. In terms of arithmetic, "mean" refers to the average of a group of numbers; the sum of all numbers added together divided by the amount of numbers in the group. Standard deviation uses the mean, or average, to account for outliers within a population. Calculating the standard deviation consists of finding the difference between each number in a particular data group and then squaring that difference. The sum of these squares are then all added together and divided by the amount of numbers in the group. Finding the square root of this result will give the measurement of variability.

  For example, for the group of numbers 5, 5, 7, 8, 10, the mean is seven. For standard deviation, find a difference of each number from the mean -- in this group, for example it would be 2, 2, 0, 1 and 3 -- square them to give results of 4, 4, 0, 1 and 9. Average them together to yield 3.6, and then find the square root of this result. In this case, it is approximately 1.897. Statistically speaking, more than 95 percent of a population falls within two standard deviations of the mean.