Medical record auditing is an excellent tool for payers to ensure that hospitals are appropriately reimbursed for services rendered. The Office of Inspector General’s (OIG) Audit Work Plan [1] for Fiscal Year 2021 has identified the improvement of the prevention, detection, and recovery of improper payments as a management challenge making the use of DRG and clinical validation audits that much more important in the success of payment integrity operations.

There are two types of medical record audits that can assist in the validation of hospital inpatient claims: Diagnosis related-group (DRG) and clinical validation (CV) audits. Although similar in that both types of audits utilize the medical record, the difference lies in the extent of the review.


“DRG” is an abbreviation for diagnosis-related groups and is a payment methodology adopted by the Centers for Medicare and Medicaid Services (CMS) in the early 1980’s that classifies patients with similar healthcare resource consumption allowing hospitals to monitor resource usage while focusing on quality of care.

The Centers for Medicare and Medicaid Services (CMS) defines the purpose of DRG validation as ensuring the medical record supports coded diagnostic and procedural information. [2] DRG audits are performed by coding professionals who follow official coding guidelines as they evaluate the hospital claim against the medical record to substantiate coded elements such as principal and secondary diagnoses, surgical procedures, present on admission indicators and discharge disposition as documented by the physician. DRG audits can be performed concurrently and retrospectively. Working DRGs are often established shortly after admission, modified during the patient’s hospitalization, and finalized upon discharge.  

Clinical Validation

Clinical validation takes the DRG audit a step further by confirming if the clinical indicators presented in the medical record validate a diagnosis documented by a physician or physician extender.  Clinical validation audits are retrospective reviews because all documented clinical criteria (emergency department notes, history & physical, discharge summary, nursing notes, laboratory results, vital signs, diagnostic test results, etc.) must be available to perform an accurate validation.  According to Richard D. Pinson MD, FACP[3], clinical validation utilizes accepted clinical criteria to substantiate documented and coded medical diagnoses.  The applied clinical criteria are based on evidence-based medical guidelines.  Clinical validation must be performed by a licensed clinician and requires an in-depth review of the medical record to validate the medical diagnoses coded.  Some of the common diagnoses that are a focus of clinical validation audit programs include sepsis, renal failure, malnutrition, and encephalopathy because of their frequent abuse.

When clinical validation became more mainstream, questions arose regarding coders performing outside of their scope because coders are not clinicians. ICD-10-CM Official Coding Guideline I.A.19 “Code Assignment and Clinical Criteria” caused further confusion by stating code assignment is not based on clinical criteria but rather the provider’s diagnostic statement. Coding Clinic Fourth Quarter 2016 pages 147-149 effective with discharges October 1, 2016 provided clarification by confirming clinical validation is not a coding review but rather a clinical review that must be performed by a clinician (RN, CMD, or therapist). [4]

Bottom Line

DRG and clinical validation audits although different in their scope of audit are both effective tools in payment integrity endeavors to minimize payment of erroneous claims and possibly detect and deter potential healthcare fraud.


Want to learn more about DRGs? Listen to our webinar on April 28th. Register HERE.

If you have any questions or comments, please reach out to [email protected]


1 Audit Work Plan Fiscal Year 2021 | Office of the Inspector General, SSA

2 Medicare Program Integrity Manual (

3 What is clinical validation? | ACP Hospitalist

4 2021 ICD-10-CM Guidelines (