Providing Hospital Partners Clarity on New CMS COVID-19 Coding Guidelines Related to DRG Reimbursement

April 5, 2020

Three Design Engineers Have a Working Meeting about Project. Various Drafts

by Sandy Routhier, RHIA, CCS, CDIP, senior vice president of DRG Validation for R1

Things are changing fast — here’s what you need to know about the latest COVID-19 coding guidelines.

As the dynamic and changing COVID-19 environment continues throughout late spring, R1 is monitoring the latest CMS guidance and related news. Effective April 1, CMS published MS-DRG information which we will review here. We have continued our client education sessions about coding guidelines during the outbreak and have highlighted some of those recommendations and best practices in this article for MS-DRG. If you would like to learn more about our coding education and our DRG Validation safety net solution, please email

MS-DRG COVID-19 update effective April 1

Direct from CMS we learn that, “In response to the national emergency that was declared concerning the COVID-19 outbreak, the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics (NCHS) is implementing a new diagnosis code, U07.1, COVID-19, into the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM), effective April 1, 2020.”

Put simply, effective for discharges beginning April 1, 2020, there is a new code to identify patients with confirmed coronavirus (COVID-19) cases. Hospitals need to report the ICD-10-CM diagnosis code U07.1 (COVID-19) to ensure proper reimbursement and statistical reporting for COVID-19 cases.

If you are in your health information management department, or are a coder, biller, revenue cycle leader, CFO, physician/provider, clinical documentation improvement specialist or hospital administrator, you need to act now regarding new CMS COVID-19 coding guidelines.

Leading industry professionals, physicians and computer-assisted coding technology experts have put out some initial thoughts on the best way to proceed that need clarification and correction, particularly when it comes to coding and documentation of this condition.

For our 1,600+ hospital clients, we see inconsistencies in terminology used in medical record documentation for COVID-19–related conditions by some providers. We’ve noted some hospitals not having the new ICD-10-CM code of U07.1 loaded in their encoders, as hospitals lag behind in updates to their encoders/groupers. Until the last few days, there wasn’t enough information available, but we can now move beyond educated guessing.

It’s extremely rare that new ICD-10 codes and associated official coding guidelines go into effect outside of the normal October 1 annual updates, let alone happen this quickly. This has left many of us in the industry struggling to obtain reliable information to act on to assure coding accuracy and appropriate reimbursement.

Getting new CMS COVID-19 coding guidelines right in a fluid environment is very important to ensure the coding is correct for reimbursement, compliance and all the other reasons that hospital coded data is used, such as statistics, research and quality projects. The current focus needs to be on timely updates for your encoder and also clarity on how physicians use the terminology (COVID vs coronavirus, etc.) in their medical record documentation.

What hospitals should be doing for new MS-DRG CMS COVID-19 coding guidelines:

  • Here is what is needed in order to be able to code and bill for COVID-19 coronavirus cases using this new ICD-10-CM diagnosis code to ensure timely proper reimbursement and statistical reporting:
  • Hospital information systems (HIS) (such as Epic, Cerner, Meditech, etc.) need to update so they can accept the new code U07.1 (COVID-19).
  • The encoder/grouper systems (such as 3M, Optum, TruCode, etc.) as well as computer-assisted coding (CAC) applications used by hospitals’ coding and CDI departments to assign diagnoses and procedure codes and group DRGs need to update so that this new ICD-10-CM code U07.1 (COVID-19) can be assigned and cases can be grouped to the appropriate DRG.
  • Hospitals may need to hold off on final coding and billing of COVID-19 cases until the hospital’s HIS systems and encoder/groupers are updated to accept the new code U07.1.
  • Educate coding and CDI professionals on the proper use and sequencing of the new U07.1 code based on coding conventions and guidelines.
  • Educate clinical documentation specialists and physicians on the proper terminology to use when documenting on COVID-19 (name of the disease: Coronavirus Disease-2019 or COVID-19) cases.
  • Update your hospital’s chargemaster (CDM) to create proper charging for coronavirus testing.

The creation of the new code U07.1 (COVID-19) has happened quickly and guidance has changed over the last few weeks, so make sure you know the most updated authoritative guidance for new CMS COVID-19 coding guidelines. Some of the new coding guidelines related to COVID-19 conflict with some established coding guidelines. The final authoritative coding and reporting guidelines can be found in their newly released PDF on ICD-10-CM Official Coding and Reporting Guidelines April 1, 2020 through September 30, 2020.

Key ICD-10-CM coding concepts for assigning U07.1 (COVID-19) to ensure proper reimbursement and statistical reporting for Coronavirus (COVID-19) cases:

  • U07.1 can be used as the principal diagnosis code (PDX) or as a secondary diagnosis code, depending on the circumstances of admission.
  • The code U07.1 is designated as a major comorbid/complication (MCC), which can increase reimbursement when assigned as a secondary diagnosis.
  • Code only confirmed cases.
  • Consider waiting for test results to come back before final coding and billing so that CDI staff can work with physicians to document the confirmed case and realize the potential optimal reimbursement.
  • U07.1 (COVID-19) would be used as a principal diagnosis when an acute respiratory illness/condition is related to COVID-19, with the specific respiratory manifestation, such as pneumonia, assigned as secondary diagnosis.
  • Cases where patients are admitted with sepsis due to COVID-19 are assigned with sepsis (A41.89) as the principal diagnosis code (PDX) and U07.1 is assigned as a secondary diagnosis code.
  • Obstetrical admissions are assigned a PDX of O98.5xx (Other viral disease complicating pregnancy, childbirth and the puerperium).

If you would like to learn more about R1’s coding education and DRG Validation safety-net solution, please email

About Sandy Routhier, RHIA, CCS, CDIP

Sandy is the senior vice president of DRG Validation (DRG-V) Auditing Services at R1. DRG-V provides a unique full-coverage software and auditing solution to assure the accuracy of coding and documentation on inpatient cases. Sandy plays a key role in the development and maintenance of the rules engine and auditing process for DRG-V. Sandy is an HIM & Coding professional with more than 30 years of experience with a strong emphasis on inpatient coding and reimbursement, medical record documentation requirements, HIM operations, electronic records, and regulatory and accreditation requirements. Sandy worked in acute care hospitals for 25 years in a variety of roles, including inpatient coding and CDI specialist, HIM director, revenue cycle director and information systems director.

We look forward to continuing to share helpful content and best practices in the healthcare industry. Stay up to date with our content by following R1 on LinkedIn.

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