Glossary - Diagnosis-Related Groups

Diagnosis-Related Groups, known as “DRGs,” are a federal system of classifying diseases into groups. Currently, there are around 500 possible classifications.

In 1983, DRGs were required to be used in all acute-care, non-specialty hospitals throughout the United States. This was done to contain costs for the Medicare Program. Instead of the hospital making a claim for reimbursement after the patient was released, the DRG system created a fixed payment or "prospective payment" system. In other words, hospitals are compensated for a patient's care based on the standard rate for the patient’s DRG.

By assigning a DRG to each patient who is admitted to the hospital, the practitioner can check guidelines such as:

• Standard treatments for the patient’s condition.
• How long the patient should be expected to stay at the hospital.

Hospitals use DRGs to:

• Understand what hospital resources will be used.
• Plan for how long the patient will stay at the hospital.
• Calculate the hospital's reimbursement.