The system of diagnosis-related groups classifies inpatients into clinically meaningful homogeneous classes based on the expected costs of treatment. It is used in several health care systems in developed countries to encourage hospitals to treat patients efficiently and to distribute resources based upon the performance of hospitals. The use of DRGs presumes that costs should drive hospital revenues, whereas other methods of financing, such as global budgeting, are based more on revenues driving costs (i.e. costs always rise as does income).
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