Understanding POA Indicators: How Present on Admission Status Impacts MS-DRG Reimbursement
Present on Admission (POA) indicators fundamentally alter MS-DRG groupings by determining whether specific complications can be used to justify higher reimbursement.
In short, if a patient acquires a preventable condition during their hospital stay (indicated by a POA of "N" or "U"), Medicare refuses to pay the additional costs associated with treating that condition. The grouping software essentially "ignores" that diagnosis when calculating the severity of the stay, potentially dropping the case to a lower-paying MS-DRG.
Here is a detailed explanation of how this mechanism works.
1. The Core Concept: POA as a Filter
When a claim is submitted, the "Grouper" software looks at the Principal Diagnosis to establish the base MS-DRG (the reason for admission). It then looks at Secondary Diagnoses to see if the patient is sicker than average, which would trigger a higher severity tier:
- Base DRG: No complications
- With CC: With Complication or Comorbidity
- With MCC: With Major Complication or Comorbidity
The POA indicator acts as a filter for these secondary diagnoses. It tells the software which conditions were brought into the hospital versus which ones happened at the hospital.
2. How the Indicators Are Treated
Different POA indicators trigger different behaviors in the MS-DRG grouper:
POA = Y (Yes) or W (Clinically Undetermined)
Result: The condition counts.
Impact: The grouper considers this diagnosis as a valid CC or MCC. If the condition allows for a higher-weighted MS-DRG, the hospital gets paid more.
POA = N (No) or U (Unknown)
Result: The condition does not count (if it is on the Hospital-Acquired Condition list).
Impact: The grouper treats the diagnosis as if it doesn't exist for payment purposes. It cannot be used to bump the MS-DRG from "Base" to "With CC" or from "With CC" to "With MCC."
3. The "Sole Reason" Rule
The POA indicator only reduces payment if the Hospital-Acquired Condition (HAC) is the only diagnosis driving the higher severity level.
Scenario A (No Impact)
A patient is admitted for a Stroke. They develop a Catheter-Associated UTI (HAC) during the stay (POA=N). However, they also have Stage 3 Kidney Disease (POA=Y) present on admission.
Result: The Kidney Disease is a valid CC. The MS-DRG stays at the higher "Stroke with CC" level. The grouping is unaffected because another valid condition justified the higher payment.
Scenario B (Financial Impact)
A patient is admitted for a Stroke. They have no other health issues. During the stay, they develop a Catheter-Associated UTI (POA=N).
Result: The UTI is ignored because it was hospital-acquired. Since there are no other complications, the case drops from "Stroke with CC" to "Stroke without CC/MCC." The hospital loses the extra funding intended to treat the complication because they were responsible for preventing it.
4. Real-World Example: Pneumonia
Consider a patient admitted for Simple Pneumonia. The table below shows how POA indicators affect MS-DRG assignment and reimbursement:
| Scenario | Secondary Diagnosis | POA Status | MS-DRG Assignment | Relative Weight | Financial Impact |
|---|---|---|---|---|---|
| Patient A | Hip fracture from fall during hospital stay (Major Injury) | N (Not present on admission) | MS-DRG 195: Simple Pneumonia without CC/MCC | 0.7 | Lowest payment - Hospital absorbs the cost of treating the hip fracture |
| Patient B | Hip fracture from fall at home before admission (Major Injury) | Y (Present on admission) | MS-DRG 193: Simple Pneumonia with MCC | 1.3 | Highest payment - Medicare reimburses for the additional complexity |
5. Broader "HAC Reduction Program" Impact
Beyond the immediate MS-DRG grouping for a single claim, POA indicators feed into quality scores.
The 1% Penalty
Hospitals with high rates of POA=N for specific conditions (like infections and pressure ulcers) fall into the "worst-performing quartile."
The Consequence
These hospitals are penalized with a 1% reduction in total Medicare payments across all discharges for the fiscal year, regardless of the MS-DRG.
Summary of Indicators
- Y: Present at admission (Pays)
- W: Provider unable to determine (Pays)
- N: Not present at admission (No Pay bump for HACs)
- U: Documentation insufficient to determine (No Pay bump for HACs)
- 1: Exempt from reporting (Neutral)
Best Practices for Accurate POA Reporting
- Document timing carefully - Clearly note when conditions are observed relative to admission time
- Review HAC lists - Stay updated on CMS's list of hospital-acquired conditions
- Train clinical staff - Ensure physicians and nurses understand the importance of documenting condition timing
- Conduct regular audits - Review POA indicator accuracy to prevent payment denials
- Use clinical judgment - When uncertain, use "W" (clinically undetermined) rather than "U" (unknown)
Testing POA Impact on Your DRGs
You can test how different POA indicators affect MS-DRG assignments using our free online DRG Grouper tool. Enter your diagnosis codes with different POA values to see the financial impact of hospital-acquired conditions on your reimbursement.
HAC POA Fix & Resubmit Feature
To help users better understand and resolve POA-related errors, we've implemented a HAC POA Fix & Resubmit feature in our DRG Grouper tool. When the grouper encounters a HAC error due to missing Present on Admission (POA) indicators, instead of showing a confusing error message, the tool:
- Automatically displays a modal showing exactly which diagnoses need POA indicators
- Shows the optimal DRG that would be assigned if all diagnoses had POA=Y, helping you understand the best-case scenario
- Defaults POA dropdowns to "U (Unknown)" so you can quickly proceed while encouraging more specific values for accuracy
- Enables automatic form resubmission once you've selected the appropriate POA indicators
Understanding POA indicators is crucial for accurate billing, compliance, and maximizing appropriate reimbursement while maintaining quality care standards.