How a DRG Works For Hospitals

Many private health insurance companies, as well as Medicare, use very specific systems to decide how much patients pay when receiving medical services. One of these systems is called the diagnosis-related group (DRG) payment system. The DRG is a code that is assigned to a patient based on the diagnosis they were given when entering the hospital and the care they received. This DRG also designates a set amount that the hospital will get paid, no matter the total amount of cost that is incurred during treatment of a patient. The way hospitals make money is if they can treat someone effectively for less money than what they get paid for the DRG. Patients also have some checks through the help of DRG audits and DRG auditor responsibilities to make sure the diagnosis and treatments given match the DRG code.

What Exactly is DRG?

As was stated above, DRG stands for diagnosis-related group. It essentially puts inpatients in a group and subgroups based on the diagnoses and treatment they receive. The DRG is based on ICD-10 codes that relate to specific diseases and conditions. For example, there are ICD-10 codes that reflect:

  • Infections and parasitic diseases
  • Cancer
  • Nervous system
  • Skin
  • Pregnancy and childbirth
  • Respiratory System
  • Eyes, ears, nose and throat
  • Neoplasms, blood and blood-forming organs

These codes can be found by inpatients after they’ve been treated once they are given a visit summary. The ICD codes are usually listed under a section labeled “Dx” or “diagnosis”.

How Much Does a Hospital Get Paid?

In order to know how much a hospital will get paid, an inpatient first needs to know the DRG and then find out the hospital’s base payment rate. If an inpatient calls the billing department and asks for itemization or the Medicare base payment rate, they can find out that info.