Which pricing formula reimburses a fixed amount based on diagnosis?

• A. Fee-for-service
• B. Diagnostic Related Group
• C. Bundled payment
• D. Per diem

Answer: (B)

The concept being tested is a payment method that sets a single, predetermined amount for an admission based on the patient’s diagnosis and related factors. Diagnostic Related Groups group patients into categories that reflect similar clinical complexity and expected resource use. For each admission, the payer assigns a fixed reimbursement—the base rate adjusted by the DRG’s weight and other factors—so the hospital is paid a set amount regardless of the actual services provided or the length of stay. This contrasts with fee-for-service, which pays for each service separately; per diem, which pays a fixed daily rate that accrues with days in the hospital; and bundled payments, which cover a defined episode but are tied to a bundle of services for an overall condition rather than a fixed per-admission diagnosis alone. DRGs are designed specifically to standardize payment according to diagnosis and expected resource use, encouraging efficiency while covering typical costs for that diagnostic category.