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Diagnosis-Related Groups

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What Is A Diagnosis-Related Group?

The term ‘Diagnosis-Related Groups’ is a  statistical system of categorizing hospitalization costs during in-patient stays targeted at reaching a fair estimate for reimbursement.

Health insurance companies, including Medicare, usually do this regularized classification.

It is usually done instead of remitting payments to the health care providers for each service that is rendered, and instead, a pre-set price is arrived at based on the Diagnostic-Related Group(DRG).

An outstanding level of attention to detail is usually used to gauge the metrics and resources invested in patient care to compensate for adequately rendered services.

The diagnosis, prognosis, and several other factors are considered before the final decision is reached.

Beyond the 1980s, the Diagnostic-Related Group added an all-payer component for non-Medicare patients and the Medicare Severity DRG(MS-DRG).

The regulatory system is the Inpatient Prospective Payment System (IPPS).

Deeper Definition

The DRG, though regularized, can be affected by treatment plans that were peculiar to the patient in particular.

Age and gender are also crucial factors to be considered.

As the payment might not be exact, the hospital may be running on a loss or making profits, depending on whether or not they spend more or less on the patient’s treatment than the DRG.

Long-Term Care Hospital Prospective Payment System (LTCH-PPS) is used to manage long-term acute disease patients.

Before the DRG system was effected in the 1980s, the health facilities would send a bill to Medicare or the insurance company charges for every band-aid, X-ray, alcohol swab, bedpan, aspirin, and room charges for every day of hospitalization.

The DRG operates such that patients with clinically similar diagnoses and whose care plans are identical get standardized hospital payments taking hospital location, patient peculiarities, and regional factors into consideration. This helps to stop the inflation of health care costs.

Diagnosis-Related Groups Example

If two friends are admitted to a different hospital for the same disease, e.g., pneumonia, one could be discharged in a week while the other spends a month in admission.

The hospital would bear the extra costs used by the hospital in the treatment as the insurer would pay both hospitals the same amount.

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