Implications of diagnosis related groups (DRGs) for the management of hospitals

Although tremendous advances have been made in the diagnosis and treatment of patients, hospital administrative systems have progressed relatively slowly. The types of information available to managers in industrial sectors are not available in the health sector. For this reason, many phenomena, such as the variations of average costs and lengths of stay between different hospitals, have remained poorly explained. The DRG system defines groups of patients that consume relatively homogeneous quantities of hospital resources. On the basis, it is possible to standardize average lengths of stay and average hospital costs in terms of the differences in case mix treated. Thus DRGs can serve as an explanation of variations in these factors between different hospitals, and also (but not only) for prospective reimbursement schemes. As in a number of other European countries, a project has been set up in Switzerland to examine the possibilities of using DRGs in hospital management, planning and financing.