What Is Principal Diagnosis?
The principal diagnosis is the condition, established after evaluation, that is chiefly responsible for a patient's admission to the hospital. It is defined under the Uniform Hospital Discharge Data Set (UHDDS) as the condition “established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.”
In simpler terms: it’s the main medical reason a patient is hospitalized, determined after tests and assessment, not necessarily the symptom they arrived with.
Why Does Principal Diagnosis Matter?
- Determines DRG Assignment: The principal diagnosis is the starting point for grouping the case under Medicare’s Diagnosis-Related Groups (DRGs), which determine how much the hospital will be reimbursed for the stay.
- Affects Payment Accuracy: Incorrect selection may lead to underpayments or denials by Medicare or commercial insurers. Accurate coding ensures hospitals receive appropriate reimbursement for care delivered.
- Drives Data and Analytics: Principal diagnoses feed into health system data used for benchmarking, epidemiological studies, resource allocation, and quality improvement programs.
- Ensures Regulatory Compliance: Accurate documentation is critical for audit readiness and to comply with CMS, Joint Commission, and payer policies.
How is Principal Diagnosis Determined?
Selection follows strict criteria from the ICD‑10‑CM Official Guidelines and UHDDS:
- Review clinical documentation: history, diagnostics, physician notes, and admission reason
- Identify the condition most responsible for hospitalization, not necessarily the most severe or resource-intensive case.
- Use only one principal diagnosis, even if multiple potential causes exist. If two or more are equally responsible, coding rules or admission circumstances guide selection.
- Avoid symptoms or signs as principal diagnosis if a definitive condition is established (codes from ICD‑10 Chapter 18 should not be used in that case).
- Respect coding conventions and sequencing rules, e.g. underlying etiology before manifestations, as per Tabular List and Index
Principal vs. Primary vs. Secondary Diagnoses
| Term | Meaning / Use |
| Principal Diagnosis | Main condition that led to hospital admission; determines DRG code. |
| Primary Diagnosis | Often refers to the most serious/requiring most resources during stay, not always the same as principal diagnosis. |
| Secondary Diagnoses | Comorbidities or complications present at admission or arising during stay that affect care or cost. |
Examples in Practice
Example 1: A patient is admitted for gastroenteritis after dehydrated symptoms in the ER. Though dehydration was the initial complaint, gastroenteritis is the principal diagnosis because it's the condition after study responsible for admission.
Example 2: A patient arrives for elective total knee replacement for osteoarthritis but suffers a heart attack before surgery. Admission was planned for osteoarthritis, so osteoarthritis remains the principal diagnosis. The heart attack is coded as secondary despite requiring more resources later.
Common Coding Challenges
- Insufficient documentation can lead to the wrong diagnosis being assigned. Coders may need to query providers for clarification
- Errors in sequencing or choosing symptom codes over draft definitive ones may lead to claim rejection by Medicare Code Editor (MCE) or Outpatient Code Editor (OCE)
- Complex cases with multiple potential principal diagnoses require careful review of admission circumstances and official guidelines to choose correctly
Legal and Quality Considerations
- CMS Enforcement: Certain diagnosis codes are prohibited as principal diagnoses. If such codes are used, claims may be returned for correction
- Clinical Documentation Improvement (CDI): Accuracy in principal diagnosis coding is a major focus of audits and internal compliance. Mis-coding this code often leads to revenue impact and audit adjustments
Real-World Impacts of Principal Diagnosis
| Area of Impact | How Principal Diagnosis Affects It |
| Billing & Payment | Directly drives DRG assignment and hospital reimbursement. |
| Case Mix Index (CMI) | Impacts hospital’s reported patient complexity and average reimbursement rate. |
| Public Reporting | Affects mortality, readmission, and quality scores submitted to CMS. |
| Data Analysis | Forms the basis for understanding disease trends and hospital performance. |
In Summary
The principal diagnosis is the cornerstone of hospital coding and billing, used to identify the main reason a patient was admitted after thorough clinical evaluation. More than just a documentation task, it affects hospital finances, regulatory compliance, and national health statistics. Coders, providers, and compliance teams must collaborate closely to ensure that the principal diagnosis is accurately chosen and properly documented.