Article

Localization Challenges and Strategic Approaches in Implementing DRG Payment in China

Zihao Chen ORCID , Skylar Biyang Sun ORCID
    Received
    28 Nov 2024
    Published
    08 Apr 2025

    Abstract

    The Diagnosis-Related Group (DRG) is a system of classification that categorizes patients into distinct diagnostic groups based on various clinical and resource consumption factors, facilitating a predetermined payment for each group and promoting efficiency in healthcare expenditure. This study comprehensively examines the localization strategies for the DRG payment system in China, highlighting the necessity for continuous optimization of DRG grouping and payment standards, strengthening healthcare quality and cost control, preventing over-treatment and ethical risks, and constructing a comprehensive payment system. It also emphasizes the importance of enhancing the standardization and informatization of healthcare data to support the accurate collection, analysis, and utilization of data, ensuring more precise decision-making and policy implementation. The analysis is based on a review of international DRG payment systems and their diverse applications, providing valuable insights and comparative perspectives for China’s DRG payment reform. The study concludes that the localization of DRG payments in China is not only a technical challenge but also a vital step towards modernizing the healthcare system, which will significantly impact the medical and healthcare sector in China by ensuring the sustainable allocation of healthcare funds, improving service quality, and fostering the fair and efficient development of healthcare services across diverse regions, and ultimately enhancing health outcomes for the population.

    Keywords

    China, Diagnosis-Related Groups (DRG), Healthcare Payment Reform

    References
    1. [1]Fetter, R.B., Shin, Y., Freeman, J.L., et al., 1980. Case mix definition by diagnosis-related groups. Medical Care. 18(2), 1–53.
    2. [2]Goldfield, N., 2010. The evolution of diagnosis-related groups (DRGs): From its beginnings in case-mix and resource use theory, to its implementation for payment and now for its current utilization for quality within and outside the hospital. Quality Management in Healthcare. 19(1), 3–16. DOI: https://doi.org/10.1097/qmh.0b013e3181ccbcc3
    3. [3]Busse, R., Geissler, A., Aaviksoo, A., et al., 2013. Diagnosis related groups in Europe: Moving towards transparency, efficiency, and quality in hospitals?. British Medical Journal. 346, f3197. DOI: https://doi.org/10.1136/bmj.f3197
    4. [4]Mathauer, I., Wittenbecher, F., 2013. Hospital payment systems based on diagnosis-related groups: Experiences in low-and middle-income countries. Bulletin of the World Health Organization. 91, 746–756A.
    5. [5]Ji, X., Fang, Y., Liu, J., 2018. Performance assessment of the inpatient medical services of a clinical subspecialty: A case study with risk adjustment based on diagnosis-related groups in China. Medicine. 97(24), e10855. DOI: https://doi.org/10.1097/MD.0000000000010855
    6. [6]Quinn, K., 2014. After the revolution: DRGs at age 30. Annals of Internal Medicine. 160(6), 426–429. DOI: https://doi.org/10.7326/M13-2115
    7. [7]Liu, R., Xue, M., Li, Z., 2020. Research progress of DRG at home and abroad. Health Economics Research. 37(10), 42–45+48.
    8. [8]France, F.H.R., 2003. Case mix use in 25 countries: A migration success but international comparisons failure. International Journal of Medical Informatics. 70(2–3), 215-–219. DOI: https://doi.org/10.1016/S1386-5056(03)00044-3
    9. [9]Leary, R.S., Johantgen, M.E., et al., 1997. All-payer severity-adjusted diagnosis-related groups: A uniform method to severity-adjust discharge data. Topics in Health Information Management. 17(3), 60–71.
    10. [10]Li, Y., Na, C., Zhang, X., et al., 2024. Experience of the reform of medical insurance payment in the United States and its enlightenment to China. Soft Science of Health. 38(06), 88–92. DOI: https://doi.org/10.3969/j.issn.1003-2800.2024.06.020
    11. [11]Annear, P.L., Kwon, S., Lorenzoni, L., et al., 2018. Pathways to DRG-based hospital payment systems in Japan, Korea, and Thailand. Health Policy. 122(7), 707–713. DOI: https://doi.org/10.1016/j.healthpol.2018.04.013
    12. [12]Liang, L., Gao, H., Feng, Q., et al., 2020. Comparative study on DRG development at home and abroad. Soft Science of Health. 34(12), 65–69.
    13. [13]Cao, Z., Liu, X., Wang, X., et al., 2024. Impacts of DRG-based prepayment reform on the cost and quality of patients with neurologic disorders: Evidence from a quasi-experimental analysis in Beijing, China. Risk Management and Healthcare Policy. 17, 1547–1560. DOI: https://doi.org/10.2147/RMHP.S458005
    14. [14]Yu, B., 2024. Analysis of opportunities and challenges brought to the development of China’s medical service system by DRG payment. Soft Science of Health. 38(09), 74–78.
    15. [15]Li, Q., Fan, X., Jian, W., 2023. Impact of Diagnosis-Related-Group (DRG) payment on variation in hospitalization expenditure: Evidence from China. BMC Health Services Research. 23(1), 688. DOI: https://doi.org/10.1186/s12913-023-09686-z
    16. [16]Yu, L., Lang, J., 2020. Diagnosis-related Groups (DRG) pricing and payment policy in China: Where are we? Hepatobiliary Surgery and Nutrition. 9, 771–773. DOI: https://doi.org/10.21037/hbsn-2020-8
    17. [17]National Healthcare Security Administration (NHSA), 2024. Notification of Issuing the Grouping Schemes for Version 2.0 of DRG and DIP payment. Available from: https://www.nhsa.gov.cn/art/2024/7/23/art_104_13313.html (cited 24 November 2024).
    18. [18]Huang, F., Zhang, Y., 2023. Requirement and construction strategy of hospital information system for DRG payment. China Digital Medicine. 18(02), 1–6+11.
    19. [19]Jiang, Y., Zhao, Y., Wang, H., 2024. Analysis of problems and countermeasures of quality control on the first page of medical cases in the context of DRG. Journal of Fujian Medical University (Social Science Edition). 25(02), 26–30.
    20. [20]Hao, Y., Ji, X., Liu, J., 2018. Role of logic check in filling in the front page of inpatient medical records. Chinese Hospital Management. 38(11), 42-43+46.
    21. [21]Li, K., Meng, X., Wang, T., et al., 2024. Challenges and countermeasures in China’s DRG payment reform. Chinese Hospitals. 28(09), 2–6.
    22. [22]He, A.J., 2023. Scaling-up through piloting: Dual-track provider payment reforms in China’s health system. Health Policy and Planning. 38(2), 218–227. DOI: https://doi.org/10.1093/heapol/czac080
    23. [23]Gao, S., Wang, X., Lu, Y., et al., 2024. Current scenario and challenges of clinical pharmacists to implement pharmaceutical care in DRG/DIP payment hospitals in China: A qualitative interview study. Frontiers in Public Health. 12, 1339504. DOI: https://doi.org/10.3389/fpubh.2024.1339504
    24. [24]Zemlin, M., Goedicke-Fritz, S., 2019. Reduced revenues after introduction of the G-DRG system due to poor coding quality? Qualification of coding staff at 177 German children’s hospitals. Klinische Padiatrie. 231(6), 313–319.
    25. [25]He, C., 2023. Problems with Diagnosis Related Group in China. Proceedings of The 2023 7th International Seminar on Education, Management and Social Sciences (ISEMSS 2023); July 14-16, 2023; Kunming, China . pp. 472–479.
    26. [26]Lu, Y., Zhu, Y., Zhong, X., 2024. Research on hospital ethical dilemmas and countermeasures under DRG healthcare payment system. Medicine & Philosophy. 45(12), 25–28.
    27. [27]Melberg, H.O., Olsen, C.B., et al., 2016. Did hospitals respond to changes in weights of Diagnosis Related Groups in Norway between 2006 and 2013? Health Policy. 120(9), 992–1000. DOI: https://doi.org/10.1016/j.healthpol.2016.07.013
    28. [28]Lin, Z., Wu, F., Cheng, B., et al., 2024. Practice and reflection on the supervision of doctor alienated behaviors under DRG payment. Health Economics Research. 41(11), 36–39. DOI: https://doi.org/10.14055/j.cnki.33-1056/f.2024.11.006
    29. [29]Cheng, B., Zhu, Z., Cui, B., et al., 2022. Discussion on the supervision mechanism for the healtheare insurance fund under DRG payment. Chinese Health Economics. 41(09), 33–36.
    30. [30]Liu, Y., Du, S., Cao, J., et al., 2024. Effects of a diagnosis-related group payment reform on length and costs of hospitalization in Sichuan, China: A synthetic control study. Risk Management and Healthcare Policy. 1623–1637. DOI: https://doi.org/10.2147/RMHP.S463276
    31. [31]Ishii, M., 2012. DRG/PPS and DPC/PDPS as prospective payment systems. Japan Medical Association Journal. 55(4), 279–291.
    32. [32]Okamoto, E., Kumakawa, T., 2014. Estimation of per-case hospitalization charges from Diagnosis-Procedure-Combination (DPC) data and an international comparison of hospital prices. Journal of the National Institute of Public Health. 63, 532–537.
    33. [33]Hamada, H., Sekimoto, M., Imanaka, Y., 2012. Effects of the per diem prospective payment system with DRG-like grouping system (DPC/PDPS) on resource usage and healthcare quality in Japan. Health Policy. 107(2–3), 194–201. DOI: https://doi.org/10.1016/j.healthpol.2012.01.002
    34. [34]Jang, S.-I., Nam, C.M., Lee, S.G., et al., 2016. Impact of payment system change from per-case to per-diem on high severity patient’s length of stay. Medicine. 95(37), e4839. DOI: https://doi.org/10.1097/MD.0000000000004839
    35. [35]Kim, K.-H., Lee, S.C., Lee, S.K., et al., 2016. Does Korea’s current diagnosis-related group-based reimbursement system appropriately classify appendectomy patients? Annals of Surgical Treatment and Research. 91(2), 66–73. DOI: https://doi.org/10.4174/astr.2016.91.2.66
    36. [36]Choi, J.W., Kim, S.-J., Park, H.-K., et al., 2019. Effects of a mandatory DRG payment system in South Korea: analysis of multi-year nationwide hospital claims data. BMC Health Services Research. 19, 1–9. DOI: https://doi.org/10.1186/s12913-019-4650-8
    37. [37]Moon, S.-B., 2015. Early results of pediatric appendicitis after adoption of diagnosis-related group-based payment system in South Korea. Journal of Multidisciplinary Healthcare. 503–509.
    38. [38]Hayashida, K., Murakami, G., Matsuda, S., et al., 2021. History and profile of diagnosis procedure combination (DPC): Development of a real data collection system for acute inpatient care in Japan. Journal of Epidemiology. 31(1), 1–11. DOI: https://doi.org/10.2188/jea.JE20200288
    39. [39]Lee, K., Lee, S., 2007. Effects of the DRG-based prospective payment system operated by the voluntarily participating providers on the cesarean section rates in Korea. Health Policy. 81(2–3), 300–308. DOI: https://doi.org/10.1016/j.healthpol.2006.05.019
    40. [40]Yan, W., Tan, H., Zhang, P., et al., 2019. Japanese diagnostic group classification payment system reform experience and enlightenment. Health Economics Research. 36(03), 39–43. DOI: https://doi.org/10.14055/j.cnki.33-1056/f.2019.03.012
    41. [41]Wu, L., Yan, T., Chneg, Y., 2022. How to construct a provider payment system based on DRG enlightenment from the practice of Japan, South Korea and Thailand. Chinese Journal of Pharmaceuticals. 53(01), 148–154. DOI: https://doi.org/10.16522/j.cnki.cjph.2022.01.018
    42. [42]Kim, H., Mahmood, A., Hammarlund, N.E., 2022. Hospital value-based payment programs and disparity in the United States: A review of current evidence and future perspectives. Frontiers in Public Health. 10, 882715. DOI: https://doi.org/10.3389/fpubh.2022.882715
    43. [43]Jürges, H., Köberlein, J., 2015. What explains DRG upcoding in neonatology? The roles of financial incentives and infant health. Journal of Health Economics. 43, 13–26. DOI: https://doi.org/10.1016/j.jhealeco.2015.06.001
    44. [44]Zhang, L., Sun, L., 2021. Impacts of diagnosis-related groups payment on the healthcare providers’ behavior in China: A cross-sectional study among physicians. Risk Management and Healthcare Policy. 2263–2276. DOI: https://doi.org/10.2147/RMHP.S308183
    45. [45]Yu, B., 2021. Reform practice and development connotation of DRG and DIP. Health Economics Research. 38(01), 4–9. DOI: https://doi.org/10.14055/j.cnki.33-1056/f.2021.01.021
    46. [46]Lai, Y., Fu, H., Li, L., et al., 2022. Hospital response to a case-based payment scheme under regional global budget: The case of Guangzhou in China. Social Science & Medicine. 292, 114601. DOI: https://doi.org/10.1016/j.socscimed.2021.114601
    47. [47]Liu, J., Chen, Y., Ma, L., et al., 2022. Dose DIP control medical expenses and suit for China: Evidence from Guangzhou in China. Research Square. DOI: https://doi.org/10.21203/rs.3.rs-2286737/v1
    48. [48]Qiu, H., 2021. Challenges and responses of implementing DRG payments to health insurance payment reforms. Fortune Life. 18, 172–173.
    49. [49]Long, Y., Yuan, X., Li, H., 2022. Exploration and suggestions of implementing diagnosis intervention packet under the reform of medical insurance payment in China. Chinese Health Quality Management. 29(04), 18–20+29. DOI: https://doi.org/10.13912/j.cnki.chqm.2022.29.04.05
    50. [50]Zou, K., Li, H.Y., Zhou, D., et al., 2020. The effects of diagnosis-related groups payment on hospital healthcare in China: A systematic review. BMC Health Service Research. 20(1), 112. DOI: https://doi.org/10.1186/s12913-020-4957-5
    Back to top