Diagnosis-related group (DRG)-based payment systems have been increasingly adopted across the globe since the 1990s as a method for financing hospital care. These systems are fundamentally structured around a patient classification framework and a payment calculation. The classification system categorizes patients into DRGs based on their diagnoses, while the payment is determined by a base rate multiplied by a relative weight assigned to each specific DRG. The underlying principle of DRGs is that patients within the same DRG category are expected to have similar clinical pathways, leading to predictable costs for diagnosis and treatment.
This predictability has been substantiated by numerous cost-of-illness studies and clinical trials focusing on prevalent conditions such as risky pregnancies, chronic obstructive pulmonary disease, diabetes, depression, alcohol addiction, hepatitis, and cancer. Experiences with DRG implementation are varied across different regions, including Western and Eastern Europe, Scandinavia, the United States, Canada, and Australia. Reviews of health system reforms, published by organizations like the World Health Organization (WHO), World Bank, the Organisation for Economic Co-operation and Development (OECD), the Canadian Institute for Health Information, the Canadian Health Services Research Foundation, and the Centre for Health Economics University of York, provide valuable insights into the effectiveness of these systems.
Different payment systems offer distinct advantages and disadvantages in achieving diverse healthcare objectives. DRG systems are often credited with enhancing efficiency and transparency in hospital financing, as well as contributing to a reduction in the average length of hospital stays. However, a notable drawback is the potential financial incentive to discharge patients prematurely, which may not always align with optimal clinical outcomes. This highlights the importance of carefully balancing financial considerations with patient care priorities in the design and implementation of DRG-based financing models.
