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DRG stands for Diagnostic Related Group. Prospective payment rates based on Diagnosis Related Groups (DRGs) have been established as the basis of Medicare’s hospital reimbursement system. The DRGs are a patient classification scheme which provides a means of relating the type of patients a hospital treats (i.e., its case mix) to the costs incurred by the hospital.

History of DRG's

The design and development of the DRGs began in the late sixties at Yale University. The initial motivation for developing the DRGs was to create an effective framework for monitoring the quality of care and the utilization of services in a hospital setting. The first large-scale application of the DRGs was in the late seventies in the State of New Jersey. The New Jersey State Department of Health used DRGs as the basis of a prospective payment system in which hospitals were reimbursed a fixed DRG specific amount for each patient treated. In 1982, the Tax Equity and Fiscal Responsibility Act modified the Section 223 Medicare hospital reimbursement limits to include a case mix adjustment based on DRGs. In 1983 Congress amended the Social Security Act to include a national DRG-based hospital prospective payment system for all Medicare patients.

Medicare and DRG's

The evolution of the DRGs and their use as the basic unit of payment in Medicare’s hospital reimbursement system represents a recognition of the fundamental role which a hospital’s case mix plays in determining its costs. In the past, hospital characteristics such as teaching status and bed size have been used to attempt to explain the substantial cost differences which exist across hospitals. However, such characteristics failed to account adequately for the cost impact of a hospital’s case mix. Individual hospitals have often attempted to justify higher cost by contending that they treated a more “complex” mix of patients; the usual contention being that the patients treated were “sicker.” Although there has been a consensus in the hospital industry that a more complex case mix results in higher costs, the concept of case mix complexity had historically lacked a precise definition. The development of the DRGs provided the first operational means of defining and measuring a hospital’s case mix complexity.

List of DRG groups

MDC 01 Diseases & Disorders of the Nervous System

MDC 02 Diseases & Disorders of the Eye

MDC 03 Diseases & Disorders of the Ear, Nose, Mouth & Throat

MDC 04 Diseases & Disorders of the Respiratory System

MDC 05 Diseases & Disorders of the Circulatory System

MDC 06 Diseases & Disorders of the Digestive System

MDC 07 Diseases & Disorders of the Hepatobiliary System & Pancreas

MDC 08 Diseases & Disorders of the Musculoskeletal System & Connective Tissue

MDC 09 Diseases & Disorders of the Skin, Subcutaneous Tissue & Breast

MDC 10 Endocrine, Nutritional & Metabolic Diseases & Disorders

MDC 11 Diseases & Disorders of the Kidney & Urinary Tract

MDC 12 Diseases & Disorders of the Male Reproductive System

MDC 13 Diseases & Disorders of the Female Reproductive System

MDC 14 Pregnancy, Childbirth & the Puerperium

MDC 15 Newborns & Other Neonates with Conditions Originating in Perinatal Period

MDC 16 Diseases & Disorders of Blood, Blood Forming Organs, Immunologic Disorders

MDC 17 Myeloproliferative Diseases & Disorders, Poorly Differentiated Neoplasms

MDC 18 Infectious & Parasitic Diseases, Systemic or Unspecified Sites

MDC 19 Mental Diseases & Disorders

MDC 20 Alcohol/Drug Use & Alcohol/Drug Induced Organic Mental Disorders

MDC 21 Injuries, Poisonings & Toxic Effects of Drugs

MDC 22 Burns

MDC 23 Factors Influencing Health Status & Other Contacts with Health Services

MDC 24 Multiple Significant Trauma

MDC 25 Human Immunodeficiency Virus Infections

External links


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