Diagnosis-related groups (DRGs) were first developed in the early 1980s, laying a very early framework for the American healthcare system’s transition towards value-based care. In 2007, CMS adopted the Medicare Severity DRG (MS-DRG) system to improve upon this initial framework and better differentiate each patient’s severity of illness and associated care costs.
The original DRG case-mix system was limited to one or two levels of severity of illness and reimbursement for categorizing patients. Most MS-DRGs, however, have three levels of severity — allowing hospitals to more accurately assess a patient’s needs without fear of hampering reimbursement. MS-DRGs are an improvement to a model that already made strides toward improved quality of healthcare for Americans.