Summary of Key Points
The DRG (Diagnosis-Related Grouping) 3.0 system is set to be released in July and officially implemented in 2027. The main change in this update is the more precise grouping, shifting from categorizing by disease type to categorizing by surgical procedure. This leads to a finer division of difficult and complex treatments, which benefits top-tier large tertiary hospitals. However, with limited total medical insurance budgets, the allocation of resources to high-value diseases (complex conditions) may squeeze the funding for low-value diseases (common illnesses) at grassroots hospitals, potentially exacerbating the issue of larger hospitals attracting patients and leading to competitive pressures between them (such as competing for patients and cutting costs). Additionally, DRG and DIP (Diagnosis-Intervention Point) are gradually merging, resulting in more unified payment rules. Although commercial insurance is seen as a supplementary funding source, it is not a solution to all problems; hospitals ultimately need to improve their clinical capabilities.
Detailed Explanation
1. More Precise Grouping in DRG3.0: Will Top-Tier Hospitals Benefit While Grassroots Hospitals Suffer?
The most noticeable change in DRG3.0 is the more detailed classification of diseases. For example, bladder tumor surgeries are now divided into different “treatment groups” based on technical complexity and cost differences. Who will benefit from this?
- Top-tier hospitals will benefit: Diseases with higher clinical value, such as complex surgeries or combined treatments (radiotherapy + chemotherapy + targeted therapy), will be more accurately categorized, allowing hospitals to receive fairer reimbursement that covers their actual costs. For instance, comprehensive treatment cases in cancer hospitals may now receive the full amount they deserve due to clearer categorization.
- Grassroots hospitals will face challenges: With a fixed total medical insurance budget, more funds go to high-value diseases, reducing the payment for common illnesses (such as mild colds or uncomplicated diabetes). Large hospitals, which already treat both complex and common cases, will have even more incentive to focus on high-value patients, potentially leading to a further diversion of patients from grassroots hospitals. Some less profitable treatments may be discontinued (e.g., minor conditions that do not require hospitalization).
Some argue that this aligns with the natural distribution of medical resources: complex diseases should be treated at larger hospitals, while common illnesses should be managed at lower-level facilities. However, if grassroots hospitals lack the necessary expertise, patients may end up paying more due to complications or longer hospital stays.
2. Budget Inadequacy and Its Impact on Doctors’ Compensation
A persistent issue with DRG reforms is the “devaluation of reimbursement rates.” For example, if the total regional medical insurance budget remains constant but the number of patients treated increases or the overall value of diseases treated rises, the amount allocated per disease category decreases.
- Increased competition among hospitals: To maximize profits, hospitals may pressure doctors to reduce costs (e.g., by shortening hospital stays or reducing unnecessary tests), and link performance to financial outcomes (e.g., offering bonuses for surplus funds). This can lead to lower reimbursement rates in the following year, creating a vicious cycle. Some doctors have reported a 30% reduction in their salaries under DRG.
- New Policy Attempts: The draft DRG3.0 proposal includes an annual budget for each hospital to prevent zero-sum competition within the region. However, this could lead to corruption if hospitals compete fiercely for funds with the insurance authorities. Additionally, fixed budgets may discourage hospital expansion and result in patients being referred elsewhere.
3. The Merger of DRG and DIP: Towards Unified Payment Rules
DRG and DIP were previously two separate systems; DRG focused on disease severity, while DIP considered both diagnosis and treatment methods. These are now being integrated into a single, more consistent framework:
- DIP has been simplified from nearly ten thousand groups to just over five thousand; DRG will continue to refine its classification for complex diseases. This will make fee calculations more standardized across different regions, making it easier for patients to receive fair treatment regardless of where they seek care. For hospitals, this means consistent management practices.
- All hospital operations (such as research, equipment, and staffing) will need to be aligned with the value of each disease type—focusing on profitable areas and cutting back on unprofitable ones.
4. Can Commercial Insurance Fill the Gap?
As medical insurance funding decreases, hospitals are turning to commercial insurance. In 2024, commercial insurance premiums are expected to approach one trillion yuan, on par with the amount raised by public health insurance. While commercial insurance offers coverage for expensive drugs not covered by public insurance, it is not a free solution:
- Insurance companies also need to make profits and will impose restrictions on hospital practices (e.g., limiting unnecessary treatments). Therefore, hospitals cannot use commercial insurance as they wish.
- Commercial insurance serves as a supplement but cannot solve the fundamental issues; hospitals must still improve their clinical performance to earn higher reimbursements for complex diseases and control costs for common illnesses.
Conclusion
DRG3.0 represents an upgrade in medical insurance payment systems, aiming for more efficient resource allocation. However, it may exacerbate the “Matthew effect” by reinforcing the dominance of top-tier hospitals and weakening grassroots facilities. To address these challenges, changes to the budgeting system and the promotion of tiered healthcare are necessary. While commercial insurance can provide some relief, hospitals must rely on their own capabilities to thrive. For patients, this means seeking treatment at appropriate levels—grasping the opportunity to receive better care for complex conditions at larger hospitals while avoiding unnecessary expenses for minor illnesses at grassroots facilities.