Which type of payment system does DRGs represent?

The Diagnosis-Related Groups (DRGs) represent a prospective payment system, which is a method used in Medicare and other insurance programs to reimburse hospitals for inpatient stays. Under this system, hospitals receive a fixed payment rate that is determined in advance based on the patient's diagnosis rather than the actual cost of the services provided. This encourages hospitals to manage resources efficiently, as they know the reimbursement amount beforehand.

In a prospective payment system, the payment is established before the care is delivered. This contrasts with other systems like cost-plus reimbursement, where costs are calculated after the services are rendered, or discounted fee-for-service models, where providers bill for services at a reduced rate. Also, negotiated rates involve agreements between providers and payers that may vary based on contracts, which is not the case with DRGs. This focus on predetermined payment amounts encourages hospitals to focus on patient care efficiency and cost control.