I am not a fan of case mix index (CMI) as a key performance indicator for clinical documentation integrity (CDI) departments.
A 2022 ACDIS white paper, “Demystifying and Communicating Case-Mix Index,” reinforces this, noting that CMI “is not a straight indicator of improved documentation and coding, although many organizations attempt to use it for this purpose.”
The value of CMI as a predictive metric for future revenue is increasingly disconnected from today’s volatile payment environment, particularly given the rise in payer denials. CMI does not indicate whether a claim was ultimately paid correctly, nor does it account for the administrative burden of appealing denials. In that sense, CMI increasingly resembles a financial investment metric that needs to be accompanied by a standard disclaimer: past performance is not a guarantee of future results.
This is especially relevant as the Centers for Medicare & Medicaid Services (CMS) continues to dismantle the Medicare Inpatient-Only List.
CMI is influenced by many factors, with surgical case mix among the most significant. It is calculated from the relative weights assigned to billed MS-DRGs for a given period of time (e.g., a month, a quarter, a year, etc.). Surgical MS-DRGs carry higher relative weights to reflect costs associated with procedures, which may include use of a surgical suite, recovery services, and related resources not typically required for medical MS-DRGs.
A decline in surgical volume will lower CMI regardless of CDI performance. This is particularly important, as elective procedures, which are often lower-risk and historically more profitable, continue to migrate to the outpatient hospital setting.
Procedures performed on fee-for-service (FFS) Medicare beneficiaries in the outpatient setting are reimbursed under the Outpatient Prospective Payment System (OPPS). While some organizations have outpatient CDI departments, most do not focus on outpatient procedures.
The primary reimbursement mechanism is Comprehensive Ambulatory Payment Classifications (C-APCs), which bundles related outpatient services into a single payment, similar in concept to MS-DRGs. However, unlike MS-DRGs, which stratify patients based on complications and comorbidities/major complications and comorbidities (CC/MCC) designations, C-APCs do not provide comparable severity differentiation.
Once a procedure is removed from the Medicare Inpatient-Only List, inpatient admission depends on the physician’s expectation that the patient will need at least two midnights of hospital care, supported by clinical indicators of acuity. While medical necessity reviews fall under utilization review (UR), some organizations may involve CDI staff to help ensure that claims data accurately reflects patient acuity when inpatient services are warranted.
As a result, the remaining inpatient surgical population is likely to become more complex. However, it remains unclear whether this increased complexity translates into higher-weighted MS-DRGs sufficient to offset expected financial losses.
The impact of ending the Medicare Inpatient-Only List is already evident in trends such as elective joint replacements. The March 2026 Medicare Payment Advisory Commission (MedPac) Report to the Congress on Medicare Payment Policy found that “FFS Medicare payment rates did not appear to be the main contributor to the financial difficulties of the hospitals that closed in 2024 or 2025.” Instead, “low patient volume” was cited most often. Inpatient stays per capita remained nearly 15 percent below the baseline in 2019.
MedPac further reports that “about one-quarter of the decline in inpatient stays per capita since 2019 was from the shift of knee and hip replacements from inpatient to outpatient settings” following their removal from the Inpatient-Only List.
In 2018, MS-DRG 470 (Major Joint Replacement without MCC) ranked first in both FFS Medicare volume and payments. Since then, it has fallen out of the top 10, with medical MS-DRGs rising to the top. MedPac reports that “the majority of the growth in FFS Medicare inpatient stays per capita in FY 2024 was from stays for infectious and parasitic diseases and for diseases of the kidney and urinary tracts.”
Sepsis is the “most common type of inpatient stay” and has increased “disproportionately” compared to other conditions. When viewed by Major Diagnostic Category (MDC), circulatory diseases are still the leading category; however, even within this MDC, procedures are expected to continue shifting to the outpatient hospital setting.
MedPac’s FFS data likely understates the full extent of outpatient migration across the Medicare population, particularly when Medicare Advantage (MA) is considered. MA plans have strong incentives to reduce costs by actively promoting outpatient procedures through prior authorization and medical necessity determinations.
Trilliant Health’s 2025 “Trends Shaping the Health Economy” describes this as a typical progression, where services introduced in the inpatient hospital setting “migrate to less intensive and expensive outpatient settings over time.” Their data shows joint replacements declining from nearly 80 percent of inpatient surgical volumes in 2018 to just over 20 percent in 2024. This is a substantial shift. For context, the current relative weight associated with MS-DRG 470 in FY 2026 is 1.928.
MS-DRG 871 (Sepsis without mechanical ventilation with MCC) is now the most common MS-DRG, with a relative weight of 1.9425, which is slightly higher than MS-DRG 470. However, other high-volume conditions, such as heart failure, have lower relative weights, ranging from 0.5660 to 1.2838. As more procedures shift to the outpatient hospital setting, downward pressure on CMI is inevitable. CDI leaders whose performance is tied to CMI trends should proactively educate hospital leadership on these dynamics.
Without this context, declining CMI may be misinterpreted as a documentation or coding issue, rather than a predictable consequence of regulatory changes hastening the expansion of procedures into the hospital outpatient setting.
