doi.org/10.52340/eab.2025.17.03.11

The Diagnosis-Related Group (DRG) financing method involves reimbursing hospitals based on resource utilization and clinical characteristics, with patients grouped by similar diagnoses according to pre-evaluated treatment standards (Jung et al., 2018). On November 1, 2022, Georgia implemented the DRG financing model with the primary goal of enhancing the efficiency of healthcare service and improving financial accessibility.
Prior to adopting DRG, medical institutions were funded based on services rendered. Within the framework of the universal healthcare system, the government covered 70%, 80%, or 90% of costs for different diagnoses, providing full coverage for socially vulnerable populations. Patients paid the remaining 10%, 20%, or 30% as co-payments. Additionally, hospitals were allowed to charge extra fees for enhanced services or physician consultations. Since hospitals independently set their rates for treatments, out-of-pocket expenses varied significantly, resulting in limited cost transparency.
Following the DRG implementation, the Georgian government established standardized rates for nosologies and introduced caps on patient co-payments. The reimbursement amount is determined based on several factors, including the patient\'s diagnosis, age, length of hospital stay, and other relevant criteria. For retired individuals, the co-payment cap is 10%, not exceeding 500 GEL, while for children aged 0-5, individuals with disabilities, and students have a cap of 20%, up to 1000 GEL. Users enrolled in the basic package are subject to a 30% cap, limited to 1500 GEL. Patients are no longer obligated to pay fees beyond these capped amounts, which has significant improved financial transparency in hospital billing.
The study aims to evaluate the impact of DRG-based hospital reimbursement on the efficiency of medical care provided to patients with myocardial infarction.
Hospitalization data from three major hospitals in Georgia were analyzed, encompassing the period from 2021 to 2024 – before and after the introduction of the DRG system.
The results of our study indicate that the implementation of DRG-based hospital reimbursement system has produced positive outcomes for patients diagnosed with myocardial infarction. Notably, the reform contributed to stabilizing overall healthcare costs and improving financial transparency. Our analysis also showed revealed reductions in both in-hospital mortality and average length of stay. However, the evidence regarding readmission rates remains inconclusive. A key trend observed post-reform was the gradual reallocation of resources from hospital to outpatient services. The shift suggests that the DRG prepayment model incentivizes healthcare providers to tailor services more closely to with patients\' medical needs, thereby enhancing care delivery efficiency.
Additionally, the study identified percutaneous coronary intervention (PCI) at the principal treatment method for myocardial infarction. Following the reform, the number of PCI procedures increased from 677 cases (54.9%) to 819 cases (57.6%), a rise largely attributed to technological advancements in interventional cardiology. Consistent with broader global trends, the use of PCI has expanded rapidly over the past two decades (Fazel et al., 2020).
The results of the present study demonstrates that the implementation of a DRG payment system can reduce the average length of hospital stay from 5.8 days to 5.2 days - a decrease of 0.6 days. Under traditional payment models, hospitals may have financial incentives to extend patient stays in order to maximize revenue. In contrast, the DRG model discourages prolonged hospitalization, as longer stays lower the average profit per case. This shift promotes behavioral changes in hospital management, encouraging more effective hospital discharge planning. Reducing the length of stay under DRG-based reimbursement positively influences cost efficiency per case and contributes to greater hospital productivity, operational efficiency, and profitability (Zou et al., 2020).
However, some studies have raised concerns that DRG-based reimbursement may incentivize premature patient discharge as a means to reduce costs and boost profits, potentially compromising the quality of care (Meng et al., 2020). Therefore, it is essential for payers – such as insurance providers and public health funds – to actively monitor treatment practices and patient outcomes to prevent adverse effects, including the early discharge of patients in unstable health conditions.
The 30-day readmission rate is widely recognized as a key indicator of inpatient care quality (Dimick and Ghaferi, 2015). Our study found that DRG-based reimbursement did not lead to a significant reduction in readmissions, with rates decreasing only slightly from 39 to 32 cases. This modest change underscores the need for further research, particularly focused on readmission trends following complex procedures. Previous studies have noted that DRG payment models may inadvertently increase readmission rates and adversely impact patient outcomes, especially among elderly patients (Ming-Wei et al., 2021).
Notably, the introduction of DRG-based hospital reimbursement in Georgia led to a substantial increase in overall hospital funding. This financial improvement was driven largely by the higher noso;ogy-specific rates established under the reform. Prior to this shift, clinics faced considerable financial strain, as tariffs set by the universal healthcare system were insufficient to cover actual costs. This underfunding negatively affected the quality of cmedical services. After the introduction of DRG-based payment in 2022, with reimbursement rates aligned more closely to diagnoses, nosology-specific funding increased – mirroring trends reported in other countries (Liu et al., 2024).
Although overall hospital funding increased following the implementation of the Diagnosis-Related Group (DRG) payment system, the average expenditure per hospitalization declined. This trend suggests that DRG reimbursement encourages healthcare providers to contain costs while maintaining – or even increasing – revenue levels (Zhang et al., 2022; Cao et al., 2024). As such, DRG payments may serve as an effective mechanism for aligning the cost of medical expenditures with actual clinical value (Li, Fan, and Jian, 2023).
Our study also found a substantial reduction in patient out-of-pocket payments after the introduction of DRG-based reimbursement systems. This improvement is attributed to the establishment of co-payment caps under Georgia’s universal healthcare program. After the reform, patients were required to pay only a defined percentage of the total cost, while hospitals were prohibited from charging any amount beyond regulated threshold – leading to more predictable and transparent healthcare expenses.
Many developed countries that have adopted DRG payment systems have implemented monitoring mechanisms to detect potential adverse effects, such as coding errors, patient selection biases, and elevated readmission rates. To mitigate these risks, it is essential that the Ministry of Health of Georgia design and enforce a comprehensive monitoring policy. The primary goal is to ensure the efficient use of medical resources, lower healthcare costs, and enhance financial accessibility for patients.
The implementation of DRG-based payments in Georgia has led to notable improvements in inpatient care. Specifically, hospital length of stay and readmission rates have significantly decreased, despite a rise in overall hospital funding. At the same time, both average hospitalization costs and out-of-pocket payments for patients have declined – highlighting increased efficiency in service delivery. The average cost per hospitalization case serves as a critical measure of resources allocation efficiency. Under DRG payment models, healthcare providers are incentivized to contain costs in order to increase revenue. This reform has significantly advanced measurability, transparency, and cost predictability across the healthcare sector.

Keywords: Diagnosis-related groups (DRG), financing system, patient, acute myocardial infarction, Georgia.
JEL Codes: I11, I18, H51

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