What is a DRG code in medical billing?


Editorial team Published on

A Diagnosis Related Group (DRG) code is a patient classification system that groups inpatient hospital cases with similar clinical diagnoses and expected resource use to determine a fixed reimbursement rate.

How DRG Coding Works in Billing

  • Fixed Payment System: Instead of paying for individual services, items, or length of stay, insurers pay the hospital a predetermined, flat rate based on the assigned DRG code.
  • Profit and Loss: If a hospital treats a patient efficiently for less than the assigned DRG payout, it makes a profit. If the treatment costs exceed that amount, the hospital absorbs the loss.
  • Input Data: Certified medical coders determine the DRG code using patient data from ICD-10-CM diagnosis codes, ICD-10-PCS procedure codes, age, discharge status, and complications.

Key Factors in DRG Assignment

  • Principal Diagnosis: The main condition established after study to be responsible for the patient's admission.
  • Complications and Comorbidities (CC/MCC): Secondary diagnoses that show a moderate (CC) or major (MCC) increase in illness severity and resource intensity, which elevate the payment tier.
  • Procedures: Surgical interventions or significant treatments performed during the inpatient stay.