Diagnosis-Related Groups in Healthcare Research

Words: 573
Topic: Health & Medicine

History of the Standard

Diagnosis-Related Group (DRG) is “a statistical system of classifying any inpatient stay into groups for the purposes of payment” created by Fetter and Thompson at Yale (Health Law Resources, 2011, par. 1). It was implemented at the beginning of 1980’s by the organization that is now known as Centers for Medicare & Medicaid Services. It was the prospective payment system that developed into AP (all patients) DRG and was the foundation of the hospital reimbursement program. DRG was used by numerous agencies to describe patients (as allowed to consider the severity of illness) and influence physicians’ behavior. In four years, severity DRGs were created within the Medicare DRG. The system was published soon. It controlled the share of revenues, which was beneficial for the health care facilities, so they were imposed to adopt it. The system was refined in 1990 and in 2005 “the state of Maryland implemented new payment regulations required by its Health Service Cost Review Commission, which uses the all patient refined DRGs (APR DRG) method for rate setting” (The evolution of DRGs, 2006).

Description of the Standard

The DRG was meant to classify all cases within a hospital. It considers clinical characteristics of the patients and payments to define similar ones and gather them in groups. In this way, hospitals do not need to discuss each patient separately. They provide a particular fee for each group based on the average costs and pay the same sum of money to every patient who belongs to one group. The system includes the adjustment for activity. Thus, the payments depend on the number of patients, the time they spend in a hospital, the procedures, etc. Unfortunately, today this system is not very developed, and other innovative ideas are on the front burner (Wilm et al., 2013).

Examples of Usage

When using the GRG system, a hospital is to maintain decent records so that all significant information about the patient is received. For example, if when performing an appendectomy, “a physician simply records the diagnosis as ‘appendicitis’, the lowest or neutral DRG category will be applied” (Newman, 2011). Then, the average costs for treatment will be calculated and an amount of reimbursed expenditures defined. As a result, the patients who refer to one DRG category will receive the same sum. In many European countries (such as England and Germany), a range of high-cost services is reimbursed separately and is added to the average payment. It deals with chemotherapy, renal dialysis, high-cost drugs, etc. (Wilm et al., 2013).


In the research, I observed several benefits of the DRG. First of all, this system allows reducing unnecessary expenditures that are likely to have an adverse effect on the health care facility. As hospitals pay an average fee, they have a great opportunity to save some money and reach maximum utilization. It is considered to be the most critical advantage of the system, as cost reduction is crucial for all organizations. Except for that, the DRG improves the overall hospital performance. As the information about the patients is systematized, fewer issues occur. Physicians also pay more attention to the way they maintain patient medical records, which means that their work becomes more efficient. Moreover, the DRG system enhances the bargaining power of health care facilities. It can increase transparency, which is highly valued nowadays (Rosenberg & Browne, 2001). The workloads are opened, and the complexity of cases can be easily defined.


Health Law Resources. (2011). Diagnosis-related group. Web.

Newman, L. (2011). What are diagnosis-related groups and why should you care. Web.

Rosenberg M., & Browne, M. (2001). The impact of the inpatient prospective payment system and diagnosis-related groups. North American Actuarial Journal, 5(4), 84-94.

The evolution of DRGs. (2006). Web.

Wilm., Q., Scheller-Kreinsen, D., Blümel, M., Geissler, A., & Busse, R. (2013). Hospital payment based on diagnosis-related groups differs in Europe and holds lessons for the United States. Health Affairs, 32(4), 713-23.