In an effort to more fully account for the severity of Medicare patients and its prospective payments to facilities, CMS replaced its Diagnosis Related Group (DRG) System with the Medicare Severity Diagnosis Related Group (MS-DRG) System in FY 2008. In addition to more accurately compensating hospitals, the MS-DRG system was also expected to encourage hospitals to more fully document and code their patients’ conditions. The MS-DRG weights were designed to produce a budget neutral transition from the DRG system to the MS-DRG system. However, changes in coding and documentation behavior threatened this budget neutrality. The purpose of this project was to continue the evaluation of the impact of documentation and coding changes on the increase in the case-mix index for hospitals paid under the inpatient prospective payment system and of long-term care hospitals paid under the prospective payment system. These estimates will be used to inform CMS on how to set payment rates for FY2012 and FY2013 in order to ensure the overall budget neutrality of the implementation of the MS-DRG system. The analysis of the FY2010 data found that changes in the documentation and coding behavior resulting from the system were responsible for 6.83% and 4.55% changes in the case mix for short-term acute and long-term care hospitals, respectively, between 2007 and 2010. These results were used to influence the FY 2012 payment rules. In addition to the analysis, IMPAQ has also contributed to the documents that are submitted to the Federal Registrar and assisted with responses generated during this process.