DRGs are the basis for Medicare's prospective payment system; hospitals are paid a specific amount per diagnosis regardless of length of stay, services provided, or tests performed. True or false?

• A. True
• B. False
• C. Only applies to outpatient services
• D. Based on patient age

Answer: (A)

DRGs group inpatient stays into categories that reflect similar resource use. In Medicare’s inpatient prospective payment system, each hospitalization is assigned to one DRG, and the hospital receives a fixed payment for that DRG. This means reimbursement is set in advance and does not depend on the actual length of stay or the specific tests and services provided during that stay. There are adjustments and exceptions, such as outlier payments for unusually costly cases and additional adjustments for teaching status, geographic location, and the presence of complications or comorbidities, but the fundamental idea is that payment is anchored to the DRG rather than to the exact services or days.