Impacts of DRG point-based payment system on healthcare resource utilization and provider behavior: a pilot quasi-experimental study in China

Abstract

Background: Developing countries commonly face challenges regarding budget constraints and inadequate cost-accounting capabilities during the implementation of a Diagnosis-Related Group (DRG) payment system. China has initiated pilot reforms of the Diagnosis-Related Group point-based payment system (DRG-PBPS) in 40 cities. DRG-PBPS, using historical cost data, integrates global budgeting with case-based point-weighted payments. In this study, its impact on inpatient resource utilization is evaluated and potential strategic behaviors of healthcare providers are examined. Methods: Using administrative data from 15,744 inpatient records of cerebral infarction cases from January 2018 to December 2022 in a Chinese city, this study uses a difference-in-differences (DID) approach to evaluate the effects of the DRG-PBPS reform on hospitalization costs and length of stay. Both the changes in the Charlson Comorbidity Index (CCI) score and 14-day, 30-day, and 90-day readmission rates between the reform and control groups were compared before and after implementation to assess whether providers were involved in patient selection and premature discharge. Results: After DRG-PBPS implementation, hospitalization costs decreased by 9.7% (p < 0.01), and length of stay decreased by 6.5% (p < 0.05). No significant changes were observed in CCI or 14-day and 90-day readmission rates, whereas 30-day readmissions fell by 2.0% (p < 0.05). These findings were robust across multiple sensitivity analyses, and the estimated effects of DRG-PBPS were broadly consistent across hospitals of different levels. Conclusion: The implementation of DRG-PBPS significantly reduced inpatient resource utilization without inducing adverse provider behavior. China’s pilot practice illustrates that the DRG-PBPS serves as an effective alternative to the fee-for-service model. For developing countries with constrained budgets and underdeveloped cost-accounting systems, DRG-PBPS provides a feasible strategy for adopting DRG-based payment systems in inpatient care.