Euro Observer Vol 11, No 4, 2009

Ever since the US Congress adopted the diagnosis related group (DRG) system for paying hospitals for Medicare patients in 1983, case payment mechanisms gradually have become the principal means of reimbursing hospitals in most industrialized countries. Nevertheless, the motives underlying the introduction and the development, as well the specific design features of DRG systems, vary greatly across countries.1 This article provides a concise overview of the main issues that need to be considered when scrutinizing and comparing DRG systems. It focuses on (a) objectives and rationales underlying DRG systems, (b) main building blocks of DRG systems, and (c) crucial incentive considerations. It also summarizes briefly the limited empirical evidence on the effect of DRGs on hospital resource use and quality of care. The accompanying case studies in this Euro Observer issue provide more detailed snapshots of individual DRG systems (Austria, Spain and France) exemplifying the great variety of systems across Europe. More in depth analyses are conducted in the framework of the EuroDRG project (www.eurodrg.eu), which compares DRG systems, costs, efficiency and quality of care across European countries and scrutinizes the prospects for a coordinated or even single European DRG system.