Diagnosis-Related Groups (DRGs) lumps together all services performed during a hospital episode. Under the DRG system, which is/are true?

Question

Options

• AMedicare is at risk for the number of admissions.
• BThe hospital is at risk for the number of admissions.
• CThe hospital is at risk for the length of stay.
• DOnly A and C

• A
  3% (1)
• C
  7% (2)
• D
  90% (26)

Explanation

D is correct because under DRGs, Medicare pays a fixed fee per admission regardless of services rendered - so Medicare bears the financial risk if admissions volume increases (A is true), and the hospital bears the risk of length of stay since extra days eat into a fixed payment (C is true).

Why B is wrong: The hospital is not at risk for the number of admissions - more admissions actually benefit the hospital because each one generates another fixed DRG payment. It's Medicare (the payer) that faces greater total outlays when admission volume rises.

Memory tip: Think "DRG = flat fee per visit." Ask yourself: who loses money when volume goes up? The payer (Medicare) - so Medicare holds the admission risk. Who loses money when stays run long? The hospital, since it absorbs extra costs on a fixed payment - so the hospital holds the length-of-stay risk.

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