A diagnosis-related group (DRG), within the context of health and wellness, is a categorization of patient care by the type of care received. The system is intended to divide care into product-style categories that consider not only the diagnosis but also the type and intensity of hospital resources that are used to treat the patient. DRGs are used to classify patient care for Medicare and other billing methods. These categories are also used by hospitals to create benchmarks and analyze the quality of care provided to patients.
Diagnosis-related groups are sorted into primary and subcategories based on several factors. At the highest level, DRGs are divided into major diagnostic categories (MDCs) based on the body systems. There are over twenty MDCs. In addition, a separate set of categories encompasses diagnosis that are not associated with a specific MDC. These groups are called pre-MDC DRGs (pre-major diagnostic category diagnosis-related groups). Once a diagnosis group is divided by body system or pre-MDC, the care is further divided into either surgical or medical sections. This is the second level of the DRG divisions. Finally, at the third level, DRGs are sorted based on either the surgical procedure performed or for non-surgical patients, the principle medical diagnosis for which the patient was admitted.
By turning long diagnoses into numerical codes, tracking frequency and outcomes of diagnoses related to each other becomes simpler and less time consuming. For example, the MDC for a musculoskeletal injury would be 08. Within that MDC category, a major should or elbow procedure would be assigned the code 08.507 or 08.508. A lesser procedure on the elbow or shoulder joint would be assigned a number between 510 and 512. These numerical codes are the equivilent of a filing system, with the first number being the file drawer and then the additional numbers being file folders within that topic.
As healthcare has become increasingly precise and specialized, additional DRG categorization systems have developed. DRGs may now be further subdivided into Medicare DRGs, all patient or refined DRGs, severity-adjusted DRGs, and DRGs based on international diagnostic standards among others. In total, there are over 750 DRGs.
When a hospital patient is admitted and diagnosed, a computer program will assign that patient's case into a group. The assigned DRG will be used not only internally by the hospital for quality and efficiency tracking but also for claims processing by third parties and Medicare. For this reason, the computer programs used to assign DRG codes are often called either groupers or pricers. Once a DRG is assigned, this designation is used to calculate the expected cost of the procedure. However, adjustments for area wage rates and geographic costs, as well as other variable factors may be made to the final price of the procedure.