Do DRG reimbursement rates reflect nursing costs?

The assumption underlying diagnosis related group (DRG) reimbursement is that the prospective, diagnosis-determined rates reflect actual costs incurred during a hospital stay. The nursing component represents a significant percentage of the costs associated with a patient's hospital stay. However, a study of actual nursing labor costs for 240 acute care patients in five DRG categories showed that some DRGs vary in daily nursing labor costs up to 500% over the course of a patient's stay. For some DRGs, the patient's DRG classification is not an adequate measure for determining, assigning, or allocating nursing costs within the institution. Hospitals that do not track actual nursing costs risk unanticipated cost overruns for some diagnoses that may have a significant effect on hospital finances.