On the feasibility and usefulness of physician DRGs

In response to pressure to curb increases in Medicare physician fees, Congress authorized the Department of Health and Human Services to undertake research on the advisability and feasibility of paying physicians based on diagnosis related groups (DRGs). This report is a summary of the findings of two reports that examined DRG-based physician payment arrangements along with other methods of packaging physician services for payment. The reports imply that a DRG physician payment system could unfairly redistribute payments from physicians with genuinely more complex and costly practices to physicians with less complex and costly practices. We conclude that a physician DRG methodology might nonetheless provide a useful tool for monitoring physician practice styles.