Diagnosis-Related Group (DRG)

What is a diagnosis-related group (DRG)?

A diagnosis-related group (DRG) is a case-mix complexity system implemented to categorize patients with similar clinical diagnoses in order to better control hospital costs and determine payor reimbursement rates. For example, Medicare pays out a set amount based on a patient’s DRG as opposed to reimbursing the hospital for its total costs. This method encourages the hospital to minimize care costs.

What is a DRG example?

Examples of some of the most common DRGs tracked at U.S. hospitals include:

  • Sepsis, or septicemia
  • Heart failure and shock
  • Respiratory infections and inflammations

Why are diagnosis-related groups (DRGs) important in healthcare?

The DRG system provides a structural framework for the Centers for Medicare and Medicaid Services (CMS) to begin promoting higher quality of care standards throughout the U.S. healthcare industry. DRG continues to encourage hospitals to improve treatment efficiency and disincentivizes the over-treatment of patients for higher reimbursement rates which had become standard practice.

What’s the difference between a DRG and MS-DRG?

The original DRG system allowed for only one or two levels of diagnoses. CMS uses the Medicare Severity Diagnosis Related Group (MS-DRG) system that can accommodate up to three levels of severity to more accurately record a patient’s condition.