Which of the following describes how DRGs influence hospital payments?

• A. They adjust payments based on patient satisfaction surveys.
• B. They set a per-day rate that increases with length of stay.
• C. They group cases with similar expected costs and pay a fixed amount per group.
• D. They determine individual physician payment adjustments.

Answer: (C)

DRGs work as a prospective payment system that classifies hospital cases into groups expected to use similar levels of resources. For each DRG category, the hospital receives a fixed payment amount for an admission, regardless of the actual costs incurred during the stay. The idea is to standardize payments across similar cases and give hospitals an incentive to manage costs efficiently. This fixed-per-admission approach contrasts with per-day rates, patient-satisfaction-based adjustments, or payments tied to physician fees, which are not how DRGs determine hospital reimbursement.