Financial Heterogeneity During Early Diagnosis-Related Group Payment Reform: A Two-Year Hospital-Based Study

China launched its national diagnosis-related group (DRG) reform to promote efficiency and improve financial risk alignment. However, empirical evidence from the early implementation period remains limited. This study aimed to assess financial heterogeneity across DRG categories and identify factors associated with financial loss during the early implementation of DRG-based payment.

This retrospective study analyzed all DRG-classified inpatient encounters from a tertiary teaching hospital in Shanghai between 2023 and 2024. The study period corresponded to the early implementation phase of DRG-based payment in the study hospital. The same core definitions of actual total cost, DRG-predicted payment, and financial deviation were applied consistently across both years. Financial deviation was assessed using absolute and relative measures. DRG-level heterogeneity was examined among groups with at least 30 cases to identify those with the most pronounced improvement or deterioration. Multivariable logistic regression identified factors associated with financial loss, and linear regression was used as a sensitivity analysis.

Among 64,864 encounters with valid DRG-predicted payment, median absolute deviation shifted from -1615 CNY in 2023 to -1923 CNY in 2024 (p < 0.001), and the proportion of loss-making cases declined from 38.9% to 28.8%. Substantial heterogeneity existed across DRGs, with both improvement and deterioration observed among high-complexity and resource-intensive groups. Logistic regression showed that longer LOS increased the likelihood of financial loss (OR = 1.075, 95% CI 1.071 to 1.079), while older age decreased it (OR = 0.996, 95% CI 0.995 to 0.997). Financial loss was significantly less frequent in 2024 than in 2023 (OR = 0.623, 95% CI 0.603 to 0.644). Sensitivity analyses confirmed these findings.

Financial alignment under DRG payment was better in 2024 than in 2023, although marked heterogeneity persisted across DRGs. LOS remained an important predictor of financial loss. These findings provide hospital-level evidence on financial risk variation during early DRG implementation. Because the analysis was based on a single tertiary teaching hospital, the results should not be generalized to other hospitals or interpreted as evidence of the broader effects of DRG payment reform in China.