Medicare payment system for hospital inpatients: diagnosis-related groups

Diagnosis-Related Groups (DRGs) are categories of patient conditions that demonstrate similar levels of hospital resources required to treat the conditions. Each inpatient that is discharged from an acute care hospital can be classified into one of the 506 DRGs currently utilized by the Medicare program. The Medicare DRG prospective payment methodology has been in use for almost two decades and is used by hospital managers for planning and decisionmaking. The viability of DRGs for future prospective payment depends on the ability to keep up with the times through updates of the current methodology.