Diagnosis Related Groups for DOD: Background of a Competitive Strategy.

Abstract : Public Law 99-661 requires that the Department of Defense (DOD) use Diagnosis Related Groups (DRG) for resource allocation. DRGs are an attempt to identify outputs of a hospital's inpatient care system that consume similar amounts of resources. These outputs are clinically significant in that they are composed of similar discharge diagnoses. Rates of reimbursement for DRGs, are predicated on the isoresource consumption nature of DRGs. The Federal government has established DRGs as the basis of a prospective reimbursement rate structure. Several state administered programs have also adopted this reimbursement policy. By establishing an expected rate of reimbursement, the paying agency has effectively provided hospitals an incentive to control costs. Keywords: Diagnosis related groups, Ambulatory visit groups, Case mix management, Prospective reimbursement.