Choosing a patient classification system to describe the hospital product.

Managers and physicians need additional tools to define the hospital's product other than diagnosis related groups (DRGs), one of several patient classification systems. DRGs are one way to define the hospital product, the treated patient, and are useful in assessing the profitability of Medicare cases. For other management activities--pricing, developing physician practice profiles, utilization review, and quality assurance--a more relevant and homogeneous patient category may be needed. This article discusses general classification concepts as well as a process for hospital managers and physicians to choose and modify patient classification systems that fit their particular situations.