Diagnosis-Related Groups (DRGs) are used for which type of payment system?

• A. DRGs are used to reimburse outpatient clinic visits
• B. DRGs are used for pharmacy claims
• C. DRGs classify inpatient stays for prospective payment
• D. DRGs are used for home health claims

Answer: (C)

DRGs are used to reimburse inpatient stays under a prospective payment system. They group hospitalizations into categories that predict the typical resource use for a stay, and hospitals receive a fixed payment for the entire admission based on the assigned DRG rather than the exact services or length of stay. This encourages efficiency, since actual costs above the fixed payment reduce margins, and costs below the payment increase margin.

DRGs are specifically for inpatient hospital stays, not outpatient clinic visits, pharmacy claims, or home health claims, which are paid under different systems (outpatient per-visit or per-service, drug claims on a pharmacy basis, and separate home health payment mechanisms).