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Diagnosis related group (DRG) is a patient classification system adopted on the basis of diagnosis consisting of distinct groupings. It is a scheme that provides a means for relating the type of patients a hospital treats with the costs incurred by the hospital. DRG are based upon the patient's principal diagnosis, ICD diagnoses, gender, age, sex, treatment procedure, discharge status, and the presence of complications or comorbidities.
It is a system developed for Medicare as part of the prospective payment system that utilizes a predetermined rate per case or type of discharge. DRGs have been used in the US in inpatient hospital discharge and the emergency department encounter query modules since 1983 to determine how much medicare pays the hospital, since patients within each category are similar clinically and some groups of patients having common demographic, diagnostic, and therapeutic attributes use the same level of hospital resources.