Accelerating the Replication and Scaling of 'Guoxin Health Experience' Amid the DRG/DIP Three-Year Action Plan

To accelerate the in-depth development of healthcare insurance payment method reforms, the National Healthcare Security Administration released the “Notice on Issuing the Three-Year Action Plan for DRG/DIP Payment Method Reform” on November 26. How to leverage this three-year period to expedite the comprehensive coverage of DRG/DIP-based payment reforms and fully accomplish the associated reform tasks has become a hot topic of discussion among industry professionals.

Payment method reform is the core and key to medical insurance reform, serving as the “booster” for the transition from volume-based payment to value-based payment in healthcare coverage. The Three-Year Action Plan has sounded the new “clarion call” for medical insurance payment method reform at the level of top-level design. Meanwhile, it has once again drawn widespread attention from all sectors of society to pioneer cities such as Jinhua and Dongying, which have taken the lead in implementing these reforms.

On December 17, the National Healthcare Security Administration issued a notice announcing the list of demonstration sites for DRG/DIP payment reforms, comprising 18 DRG demonstration sites, 12 DIP demonstration sites, and 2 comprehensive (DRG/DIP) demonstration sites, covering a total of 32 cities. Notably, “Jinhua” and “Dongying” were prominently included in the list.

How can these two cities develop comprehensive plans, leveraging the capabilities of China Reform Health, to create benchmark projects for healthcare payment method reform? Under the guidance of new healthcare reform policies, how can they solidify their foundations and establish a demonstrative effect as pilot regions for DRG/DIP? As a publicly listed central state-owned enterprise, how does China Reform Health utilize its competitive advantages to replicate and promote the “Jinhua Model” and “Dongying Benchmark” nationwide?

DRG represents a revolutionary shift from fee-for-service to diagnosis-related group-based payment, and is currently the preferred approach for health insurance payment reform in many countries worldwide.

Although China’s adoption of Diagnosis-Related Groups (DRGs) started later than in countries such as the United States, Australia, and Germany, payment system reform has consistently been a key direction of healthcare reform in China. Since the first large-scale DRG study was launched in 1988 across ten major hospitals in Beijing, DRGs have been developed in China for over three decades.

The 2009 release of the “Opinions of the Central Committee of the Communist Party of China and the State Council on Deepening the Reform of the Medical and Healthcare System” accelerated the development of DRG payment reform in China. Within a few years, multiple versions of DRG grouping were developed in light of domestic clinical and management practices; however, their application was largely confined to internal performance management within public hospitals and was not widely adopted for health insurance payments. Due to the lack of consensus on top-level design, nationwide implementation of DRG practices faced numerous challenges.

As pressure to control healthcare insurance costs continues to intensify, efforts to explore Diagnosis-Related Group (DRG) payment reforms have been strengthened across various regions. Pilot cities, represented by Jinhua in Zhejiang Province, have pursued bold reforms and pioneered implementation, continuously accelerating the pace of China’s DRG payment reform.

In 2016, in response to the control of healthcare insurance expenditures and with a focus on reshaping the payment mechanism, Jinhua City implemented bold and clear-cut reforms in its Diagnosis-Related Group (DRG) payment system. By introducing health management tools from China Reform Health Management and Services Group Co., Ltd., the city combined the point-based method with global budget management, becoming the first pooling area in China to apply DRGs to regional healthcare insurance payments. This initiative provided an innovative and representative local practice case for the top-level design of the national payment system reform in subsequent years.

In 2017, the General Office of the State Council issued the Guiding Opinions on Further Deepening the Reform of Basic Medical Insurance Payment Methods (Guo Ban Fa [2017] No. 55), which explicitly stipulated the implementation of a diversified and composite medical insurance payment system. It encouraged regions with appropriate conditions to actively explore integrating the point-based method with global budget management and diagnosis-related group (DRG) payment, and to gradually replace facility-specific global budgets with regional (or scope-defined) global caps on medical insurance funds. Since then, the pioneering and advanced nature of the “Jinhua Model” has attracted widespread attention from all sectors of society.

The collaboration between Jinhua City and China Reform Health dates back to 2016. In May of that year, the two parties finalized the fund settlement scheme based on the DRG point system, and officially applied it in July to the payment for inpatient medical services at seven major hospitals in downtown Jinhua, pioneering a pilot program centered on DRG-based reimbursement with a diversified, composite payment model. Subsequently, the DRG system in Jinhua expanded to cover 49 inpatient medical institutions. By 2018, all 143 medical institutions with inpatient qualifications across the seven counties and county-level cities under Jinhua’s jurisdiction had completed implementation, achieving full coverage of inpatient conditions citywide. As a result, Jinhua became the first pooling area in China to fully implement payment and settlement based on the DRG point system under a global budget framework.

DRG Point-Based Method: A Comprehensive Approach Integrating Global Budgeting, Disease Grouping, Point Scoring, and Intelligent AuditingSpecifically, China Reform Health Management and Services Group Co., Ltd. innovatively applies the PPS point-based method. Building upon DRG grouping, it establishes payment standards for each group through scientific big data analytics. These standards are used to provide prospective payments to healthcare institutions, thereby implementing a mechanism characterized by “global prospective payment, year-end settlement, retention of surpluses, and assumption (or sharing) of deficits.”

China Reform Health holds unique advantages in DRG innovation. As a low-profile central state-owned enterprise with “China Reform” heritage, it has been deeply engaged in the healthcare security sector for many years, building a comprehensive and systematic applied medical knowledge framework. Based on this foundation, it has developed localized health insurance cost-control audit databases for various regions, along with a millisecond-level health insurance audit engine. Its professional knowledge accumulation and robust IT capabilities have laid a solid foundation for the introduction of the DRG point-based payment method, supporting Jinhua City’s health insurance fund allocation and facilitating the transition from volume-based to value-based reimbursement.

Reform of Medical Insurance Payment Methods: Promoting Standardized Clinical Practices and Rational, Diagnosis-Based Treatment through the Strategic Purchasing Role of Medical Insurance, Ultimately Integrating the Healthcare Service System into Sound Operation. Compared with fee-for-service payment, Jinhua’s DRG point-based method, combined with global budget management, not only strengthens cost containment but also reduces medical costs and improves service quality.

With the citywide implementation of the Diagnosis-Related Group (DRG) point-based payment method in Jinhua, notable achievements in medical insurance administration have frequently emerged. Jinhua has been successively approved as a national pilot city for DRG-based payment, designated as a national demonstration site for intelligent medical insurance fund monitoring under the “Two Pilots and One Demonstration” initiative, and selected as a pilot city for testing and applying standardized medical insurance information codes. In this capacity, Jinhua undertakes the testing and application of 15 national standard information codes for medical insurance, including those for disease diagnoses and surgical procedures.

By establishing a DRG operational analysis system and a special-case single-negotiation mechanism to promote refined management in designated medical institutions, Jinhua City has cumulatively reduced the financial burden on the public by RMB 687 million. The growth rate of health insurance fund expenditures has decreased from 14% to 7%, achieving a win-win situation for insured individuals, medical institutions, and the health insurance fund. This has established a cost “benchmark” recognized by four parties—the health insurance authority, hospitals, physicians, and patients—effectively addressing public healthcare security concerns and significantly enhancing public satisfaction and sense of gain.

Despite the significant achievements, Jinhua City’s healthcare insurance payment reform has not stopped there, as fully demonstrated by its nationwide pioneering implementation of the “APG Point System” for outpatient services. On January 14, 2021, the Jinhua Municipal People’s Government held a press conference to announce the citywide rollout of the payment reform based on the outpatient “APG Point System.” This marks another innovation in healthcare insurance payment methods following the city’s earlier adoption of the “DRG Point System,” and represents a successful exploration by China Reform Health Management and Services Group Co., Ltd. in outpatient payment models.

Based on the characteristics of outpatient services in China, China Reform Health has developed a modular Outpatient APG payment solution by innovatively combining prepaid payment schemes with capitation-based prepayment systems, thereby achieving comprehensive management coverage of diverse outpatient care processes.

It is reported that after the implementation of the outpatient “APG point-based” payment reform across Jinhua City, the annual growth rate of outpatient medical insurance fund expenditures has been kept within 10%, significantly lower than the approximately 20% observed prior to the reform.

In the long term, Jinhua City has established an effective closed-loop management system by implementing the Diagnosis-Related Group (DRG) point-based payment reform for inpatient services and the Ambulatory Patient Group (APG) point-based payment reform for outpatient services. This approach aligns with the reform requirements outlined in the “Guiding Opinions on Establishing and Improving the Outpatient Mutual Aid Security Mechanism for Employee Basic Medical Insurance,” issued by the General Office of the State Council in April 2021, and has also promoted high-quality, coordinated development among healthcare providers, medical insurance, and the pharmaceutical industry.

Dongying City was among the first in China to explore the implementation of diagnosis-based point payment for medical insurance. Since being approved as a national pilot city for Diagnosis-Intervention Packet (DIP) payment, Dongying has partnered with China Reform Health Management and Services Group Co., Ltd. to take the lead in Shandong Province in reforming its medical insurance payment system by adopting diagnosis-based point payment. Through conceptual innovation, breakthroughs in thinking, institutional integration, and policy consolidation, the city has effectively strengthened its efforts to control costs, reduce expenses, ensure quality, and improve efficiency. By exploring the “443” model, Dongying has successfully created a “Dongying Model” as a national DIP pilot benchmark.

In the “443” model, the first “4” refers to the “Four Strengthenings” that solidify the foundation of payment methods: strengthening system construction, strengthening data analysis, strengthening implementation pathways, and strengthening technical support. The second “4” denotes the “Four Integrations” that broaden the application scenarios of payment methods: integration with the “Three-Medical Linkage” (coordinated reform of medical care, health insurance, and pharmaceuticals), integration with the national medical insurance credit system, integration with equitable healthcare, and integration with intelligent monitoring. The “3” signifies the “Three Benefits” that ensure the stable operation of payment methods: precise payment enhances the efficiency of fund utilization; stimulated vitality drives improvements in medical technology; and improved quality with reduced costs delivers tangible benefits to insured individuals.

At the operational level, leveraging China Reform Health’s years of in-depth experience and technical advantages in comprehensive medical insurance management services and digital transformation, Dongying City has innovatively implemented a mechanism that links DIP fund pre-disbursement with medical insurance credit ratings, explored an auxiliary catalog system, and adopted a “employee benefit coefficient” policy, ultimately achieving tripartite coordination among medical insurance administration, clinical services, and pharmaceutical management within hospitals. Notably, the effective integration of the two national pilot programs—DIP payment reform and the construction of a medical insurance fund regulatory credit system—represents a first-of-its-kind initiative nationwide.

It is reported that since the official launch of actual DIP (Diagnosis-Intervention Packet) payment on August 1, 2021, the system has been operating smoothly. In the first three quarters of that year, the city’s total inpatient medical expenses increased by 3.8% year-on-year compared to 2020, significantly lower than the 8.12% year-on-year increase recorded in 2020 compared to 2019.

Following the formal implementation of DIP-based payment, overall benefit coverage for insured residents in Dongying has stabilized, with a significant reduction in out-of-pocket medical expenses at higher-tier healthcare institutions (such as Grade A tertiary hospitals). For instance, after implementing DIP, Dongying People’s Hospital achieved a year-on-year decrease of over RMB 1,000 in the average cost per discharged patient in October 2021, despite notable increases in key performance indicators, including the number of discharges, volume of level-4 surgeries, and minimally invasive procedures.

Furthermore, by leveraging DIP to strengthen intelligent auditing and supervision, irregular practices by medical institutions have been effectively reduced, thereby safeguarding their legitimate rights and interests.

In supporting Dongying’s efforts to establish a “model project” for Diagnosis-Intervention Packet (DIP) payment, the professional services and technical capabilities of China Reform Health have been highly recognized by the Dongying Municipal Healthcare Security Administration. It is reported that at the launch ceremony held on October 26 for the formal implementation of healthcare insurance payment reforms in Shandong Province—covering Diagnosis-Related Groups (DRG), global budgeting with regional point-based allocation, and DIP—the provincial healthcare security authorities fully affirmed China Reform Health’s contributions to the province’s healthcare insurance payment reform initiatives.

Deepening the reform of healthcare insurance payment methods is a key step in ensuring public access to high-quality medical and pharmaceutical services and improving the efficiency of fund utilization; it is also an inevitable requirement for deepening healthcare security reforms and promoting the high-quality development of healthcare insurance. The "Three-Year Action Plan" outlines the roadmap and timeline for the implementation of DRG/DIP reforms in China. How to implement these reforms correctly and effectively, while forging distinct pathways suited to local contexts, is a question jointly considered by healthcare insurance authorities, medical institutions, and even third-party enterprises.

Previously, 30 cities had launched pilot programs for Diagnosis-Related Group (DRG) payment, and 71 cities had initiated pilot programs for Big Data Diagnosis-Intervention Packet (DIP) payment. From 2022 to 2024, DRG/DIP payment methods will transition from pilot initiatives to mainstream practice, with the advanced experiences and effective practices from these pilots being further promoted and replicated nationwide during this three-year period. By the end of 2025, a new mechanism for medical insurance payment will be fully established across China, featuring national uniformity, vertical coordination between upper and lower levels, horizontal collaboration between internal and external stakeholders, standardized norms, and practical efficiency.

China Reform Health has cultivated deep expertise in the field of “collaborative development among medical insurance, healthcare services, and pharmaceuticals” for many years. By aligning with national and industry standards, it has built a comprehensive knowledge system encompassing medical insurance, clinical care, and pharmaceuticals, and leveraged advanced technologies such as artificial intelligence and big data to gradually establish unique competitive advantages within the industry. Its extensive experience in reforming medical insurance payment methods also lays a solid foundation for comprehensively promoting the three-year full coverage of DRG/DIP payment systems on a pilot-to-national scale, in response to the requirements of the national Three-Year Action Plan.

Currently, under the strategic guidance of “One Core, Two Wings; Dual-Wheel Drive; Digital Empowerment; and Health Ecosystem,” China Reform Health has launched digital medical insurance services in over 190 pooling areas across 28 provinces nationwide. By continuously refining its product portfolio, the company is gradually expanding its competitive advantage in the medical insurance sector.

After years of technological accumulation and practical experience, China Reform Health not only pioneered the intelligent audit platform for medical insurance funds and the DRG point-based method in China, but also took the lead in implementing the DRG/DIP medical insurance fund payment management platform. It has explored and innovated a modular outpatient APG solution, achieving comprehensive coverage and management of diverse outpatient care processes. By continuously building a closed-loop “DRG + DIP + APG” solution that covers both inpatient and outpatient services, the company is steadily consolidating its position as a leader in third-party medical security services.

As the top priority in China's medical insurance reform, the DRG/DIP payment method reform is an important lever for regulating medical service behavior and guiding the allocation of medical resources.

For years, China Reform Health has actively fulfilled its responsibilities as a central state-owned enterprise, leveraging professional expertise to enable medical insurance payment systems to play a pivotal “leading” role. To date, China Reform Health’s DRG (Diagnosis-Related Groups) system has been implemented in 52 pooling areas, including 7 national pilot cities and 45 non-pilot cities; its DIP (Big Data Diagnosis-Intervention Packet) system covers 8 provinces nationwide, encompassing 12 national pilot cities and 4 non-pilot cities. These efforts have significantly alleviated the financial burden on the public, substantially improved the managerial performance of healthcare institutions, and effectively strengthened the governance capacity of medical insurance, thereby fostering a multi-party win-win scenario for insured individuals, medical insurance administrative agencies, and healthcare providers.

It is reported that China Reform Health Management and Services Group Co., Ltd. will continue to enhance its data processing and service capabilities in accordance with the national healthcare security reform requirements. By leveraging core digital technology engines, the company aims to consolidate its strategic advantage in digital healthcare security, unlock the development potential of digital medicine, and foster synergistic forces in digital pharmaceutical regulation. Meanwhile, it will actively expand its initiatives in chronic disease management and the construction of medical consortia, continuously building a comprehensive health security service platform and ecosystem.

In the construction, promotion, and replication of DRG/DIP systems, China Reform Health will aim to “boost the achievement of full DRG/DIP coverage within three years,” continue to leverage the demonstrative roles of the “Jinhua Model” and the “Dongying Benchmark,” and integrate its advanced experience and typical practices accumulated over many years from serving pilot cities and demonstration regions across China with local practices. This will help local healthcare security administrations and medical institutions forge a path for healthcare payment reform that aligns with their local characteristics.