Did you know that whenever you receive inpatient care at the hospital, you’re given a designation? This designation takes in several factors and can influence the care you receive during your stay. Today, we’re going to look at diagnosis-related groups, how they’re used by Medicare and hospitals, and how they can influence your care without you ever knowing it. In many senses, diagnosis-related groups are one of the hidden pieces that form the backbone of our current insurance-based health care system.

Important Terms

There aren’t many articles out there about diagnosis-related groups that are written for the average person. In researching this particular article, what we mostly found was effectively alphabet soup. To help you learn more about this topic, we’ve highlighted three of the main acronyms you’ll see below and provided a brief explanation of each.

What is a DRG?

A very simplified explanation of a DRG can be this: A DRG is a category that a patient falls under that determines how much their insurance plan pays the facility they received care in. In other words, the DRG tells the IPPS how much your plan should pay the inpatient facility you’re staying at. Your DRG is determined upon your discharge from the facility and is affected by factors like:

  • The severity of the case
  • The prognosis, or the predicted outcome and chances for recovery
  • The type of treatment
  • How difficult treatment will be
  • THe need for intervention or how important treatment (both immediate and ongoing) is
  • How many diagnostic and treatment services are needed and how expensive they are to give

From here, Medicare, or the insurance company, determines how expensive of a patient you were and pays the hospital accordingly. This is a generalized payment, so it may not actually be what the hospital paid while treating you. We’ll discuss this more later.

If you’re curious, it’s possible to figure out a base approximation of what your hospital got paid for the treatment they gave you. First, you need to find out what the hospital’s base payment for Medicare is. You can find this out by calling the hospital’s financial department. Next, navigate to the 2020 IPPS final rule page on CMS’ website to find the Final Rule and Correction Notice Tables. From there, you’ll want Table 5, which is the third entry on the list. This will allow you to view a spreadsheet that lists different procedures. Under the column labeled “Weights,” you’ll see how the procedure modifies the base payment for the hospital. A weight of 1 is considered the average relative weight for a procedure. Anything less than 1 is a less costly procedure, while over 1 is more expensive and more resource-intensive. To find out roughly how much your hospital was paid, multiply the base payment by the weight of the procedure.

How Can a DRG Influence Your Treatment?

As we mentioned earlier, a payment from the IPPS is based on the DRG, not how much was actually paid for to treat a patient. This means that the IPPS payment could potentially be more or less than what was actually spent, which can act as an incentive to lower the costs of treatment to prevent the hospital from losing money. At the same time, it can promote the use of preventive treatment, which tends to be less expensive than major surgeries to fix easily avoided issues. Studies have also found that DRGs improved the overall quality of health care because they discourage unnecessary and potentially dangerous procedures while promoting efficiency in treatment. All this can help you get better care and save money!

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Ultimately, will you deal directly with DRGs? In a way, yes and no. While you may not need to know what a DRG is specifically or what DRG you’re in, it does influence your treatment. These factors are critical to defining the care you receive, not only as an inpatient, but just as an American. When you also consider that DRGs are important to the health of the Medicare program, they become one of the key structures allowing millions of Americans to receive affordable health care each year.