The impacts of the diagnosis-related group payment reform on hospitalization-related medical expenses: evidence from China

Diagnosis-related group (DRG) payment methods are increasingly being used to decrease the costs of healthcare worldwide. However, the effectiveness of cost controls varies from region to region. This study aimed to analyze the impacts of DRG payments on medical costs in China and provide theoretical support for the promotion of DRG payments in other countries.

Patients from City Wuxi in China was selected, which underwent a reform from fee-for-service (FFS) payment to DRG payment during the study period. Ordinary least regression analysis (OLS) and propensity-score-matching (PSM) were used to analyze the effects of DRG, Causal Forest (CF) of machine learning algorithm was used to analyze the underlying reasons for the results.

The OLS model revealed that personal total medical costs decreased by 28.3% after the DRG reform and the total personal out-of-pocket payment (OPP) decreased by 21.3% after the DRG reform, but the personal out-of-pocket ratio increased by 15% after the DRG reform. The PSM-OLS model regression and the DRG reform results indicated decreases of 29.4% and 24.2% in personal total cost and OPP costs, respectively. The proportion of OPP costs increased by 9%. The causal forest model suggested that age and the number of surgeries played a significant role in the impact of DRG reform on patients' medical burden (total medical expenses, OPP costs, and OPP Ratio). Results indicate that the impacts of the DRG reform was associated with a 27% reduction in patients' medical burden (SE = 0.007), a 19.4% reduction in out-of-pocket expenses (SE = 0.012), and a 1.4% increase in utilization costs (SE = 0.002).

DRG payment can control the growth of medical expenses and ease the burden on the medical insurance fund. However, the current rules may increase the OPP ratio and the economic burden on patients. A regulatory model in line with China's national conditions still must be explored.