What does the term "DRG" stand for in Medicare reimbursement?

The term "DRG" stands for Diagnosis-Related Group in the context of Medicare reimbursement. This classification system is utilized to categorize hospital cases into groups that are expected to have similar hospital resource use. DRGs are pivotal in determining how much Medicare will reimburse hospitals for inpatient stays. The use of DRGs is intended to provide a more standardized reimbursement structure, incentivizing efficiency in the delivery of healthcare services while maintaining a focus on patient outcomes.

Each DRG is associated with a set payment, which is determined based on the typical costs associated with treating patients in that category. This approach encourages hospitals to manage their resources more effectively, as they retain any savings from under-spending compared to the DRG payment. Understanding the role of DRGs in reimbursement is crucial for navigating the financial landscape of healthcare services and ensuring compliance with Medicare policies.