DRGs as management information or reimbursement method.

Diagnosis Related Groups (DRGs) can be used either as a system of management information or as a method of funding hospitals. They cannot be used as both, for the incentives which are generated if hospitals are reimbursed by DRG encourage misclassification and game playing. It is argued that the major problem facing the Australian hospital system is social, not technical, efficiency. Funding by casemix focuses on the latter. If efficiency of either sort is to be improved, managers and clinicians need a common language which links casemix to cost and outcome. Used as a management information system, DRGs meet this need, but to do so effectively they should not be burdened with the additional responsibility of hospital reimbursement.