What does the prospective payment system established by DRGs focus on?

The prospective payment system established by Diagnosis-Related Groups (DRGs) focuses on patient diagnosis categories to set charges. This system classifies hospital cases into groups that are expected to have similar hospital resource use, which allows for standardized reimbursement based on the diagnosis rather than the specific services rendered or the length of the hospital stay.

By grouping patients with similar clinical conditions into these categories, the system encourages hospitals to manage costs effectively while still delivering necessary care. Each diagnosis group has a predetermined payment rate, incentivizing efficient treatment and cost management while ensuring that patients receive appropriate care based on their diagnosis.

This contrasts with other concepts such as cost-based billing, which would focus on actual costs incurred rather than predetermined group rates, or reimbursement based on the length of stay, which does not account for variations in diagnoses. Individualized patient needs assessments are also not the core of the DRG system, as it is more about categorization for billing purposes than about tailoring care to individual patient needs.