A Diagnosis Related Group (DRG), also known as a Medicare Severity — Diagnosis Related Group (MS-DRG), refers to a group of patients with similar clinical characteristics and treatment costs. These groups are part of a payment system for Medicare Part A hospital inpatient stays created by the Social Security Act.
Patients are categorized into an MS-DRG based on many factors including diagnosis, age, and surgical procedures. The MS-DRG has an assigned fixed payment amount that is calculated by the average treatment cost of patients in the same category. Medicare uses MS-DRG information provided on a hospital’s Medicare claim to determine the payment amount to the hospital.