Diagnosis Related Groups
The rising cost of medical care in the United States has been a concern for quite some time. Beginning in the 1960s with the advent of Medicare, a system has been needed that will balance cost with services provided within acceptable parameters. In 1982, the US Congress placed a cap on operating expenses for each Medicare case treated in a hospital, as a protective measure to insure adequate payment within reasonable limits. A prospective payment system (PPS) was initiated as a result of the cap, whereby hospitals receive a flat rate for each admission based on a calculation of rates determined by the diagnosis (Kahn, et al, 1990). A system whereby the diagnosis is grouped according to services, estimated length of stay and type of technology required for treatment was developed by Robert B. Fetter and John D. Thompson in the early 1980s (Burke, 1992). The diagnostic related groups (DRGs) form the basis for the payment system. This system was originally set up for use with Medicare but has been refined and expanded to include non-Medicare situations in the United States and abroad. Some form of DRGs has been adopted in more than 20 countries, including the United Kingdom, France, Finland, Norway, Taiw
"A weight is calculated for each DRG which represents the average resources necessary to care for cases in that DRG relative to the average resources used to treat all cases in all other DRGs. Medicare's new payment plan: A mixed blessing. APACHE-L: A new severity of illness adjuster for inpatient medical care. Comparison of alternative relative weights for diagnosis-related groups. Data from patient bills is available for payment computation in a more timely manner (Rogowski and Byrne, 1990). Each year, the relative weights assigned to DRGs are recalibrated based on the latest available discharge data for Medicare discharges" (Edwards, et al, 1994, pp. Health Care Financing Review, 7(3), 37. This resulted in a simpler computation and extinguished the need to update the calibration as the cost ofresources increased.
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