What Is a DRG? How Medicare Pays for a Hospital Stay
A diagnosis-related group, or DRG, is how Medicare classifies a hospital stay for payment. Every inpatient stay is assigned one of several hundred MS-DRGs based on the principal diagnosis, any procedures, and the patient's complications. Medicare then pays a set amount for that DRG, adjusted for the hospital, whatever the hospital charged.
Reading a DRG
A DRG has a three-digit code and a description. Many conditions come in a family of two or three:
- with MCC — with a major complication or comorbidity;
- with CC — with a complication or comorbidity;
- without CC/MCC — neither.
So septicemia appears as DRG 871 (with MCC) and 872 (without MCC). Each version has its own weight, and therefore its own payment.
How the payment is set
Each DRG has a relative weight reflecting the average cost of treating that kind of patient. Medicare multiplies the weight by a standard rate, then adjusts for the hospital's local wages, its teaching activity and its share of low-income patients. Very expensive outlier cases get extra payment. The result is why payments vary far less between hospitals than charges do.
Why it matters for prices
Because the DRG fixes Medicare's payment, a hospital's charge for a Medicare stay mostly affects patients and payers who do not pay Medicare rates. Comparing charges for the same DRG across hospitals — as each DRG page on this site does — compares hospitals' list prices for comparable stays.
The most common Medicare stays in 2024 were septicemia with MCC, heart failure with MCC and respiratory infections. Browse all DRGs or compare hospitals for one.
Questions
What does MCC mean in a DRG?
Major complication or comorbidity. Many conditions are split into versions with an MCC, with a CC (complication or comorbidity), and without either; the versions with complications pay more because those patients cost more to treat.
Does the DRG decide what I pay?
Not directly. It decides what Medicare pays the hospital. A Medicare patient owes the Part A inpatient deductible for the benefit period, whatever the DRG.