China's National Health Commission Launches C-DRG Payment Reform Pilot Program

On June 2, the National Health and Family Planning Commission held a kickoff meeting in Shenzhen, Guangdong Province, to launch pilot programs for the reform of diagnosis-related group (DRG)-based payment and charging.

Attendees included: Deputy Director of the National Health and Family Planning CommissionWang Peian,Inspector, Department of Finance, National Health and Family Planning CommissionHe Jinguo,Deputy Director, Department of Finance, National Health and Family Planning CommissionFan Zhimin,Deputy Director of the Department of System Reform, National Health and Family Planning CommissionZhuang Ning,Inspector, Bureau of Medical Administration and Hospital Management, National Health and Family Planning CommissionLi Luping,Deputy Mayor of Shenzhen Municipal People's GovernmentWu Yihuan。

Other attendees include:Chen Ningshan、Nie Chunlei,Qi Jianfeng, Chen Hu, Wang Lechen, Hu Mingyuan,Fu Wei,Zhang Zhenzhong,Jiang Qin,Yu Lihua,Meng Qun, Xue Ming, Miu Zhiwen, Cheng Nian, Xiang Zhunetc.

Relevant Leaders Who Attended and Delivered Remarks

Wang Peian, Deputy Director of the National Health and Family Planning Commission, stated at the conference that the pilot program for DRG-based payment reform is one of the key tasks in this year’s healthcare reform. Provinces where pilot regions are located must provide strong support to these regions and actively encourage eligible areas and medical institutions to carry out pilot work in accordance with national requirements.

Wang Peian pointed out that domestic and international experience has demonstrated that reform of payment methods is the most important and effective lever for promoting the coordinated reform of healthcare, medical insurance, and pharmaceuticals. Currently, most regions have implemented diverse payment method reforms; however, these initiatives cover a limited scope of patients and medical services, and lack precision in management.

Wang Peian, Deputy Director of the National Health and Family Planning Commission

DRG-based payment and charging internalizes pharmaceuticals and consumables as cost elements for medical institutions, which helps incentivize hospitals and medical staff to effectively reduce costs and improve service quality, control the unreasonable growth of medical expenses, and promote the transformation of operational mechanisms in medical institutions.

Therefore, implementing DRG-based payment reform is an effective measure to promote the reform of public hospitals’ operational mechanisms and eliminate the practice of subsidizing medical services with drug profits, as well as an effective approach to establishing a tiered diagnosis and treatment system.

It is reported that Fujian Province, Karamay in Xinjiang, and Shenzhen in Guangdong have each designated multiple medical institutions to participate in the pilot program.

The following are the key highlights of the conference, compiled by VCBeat:

In recent years, with the continuous rise in medical costs, the expenditure pressure on medical insurance has gradually increased. By reforming the Diagnosis-Related Group (DRG) payment system and advancing supporting institutional reforms such as incentive mechanisms for healthcare providers and medical insurance,Transition hospital payment and charging methods from the traditional "fee-for-service" model to a hybrid payment system featuring DRG prospective payment with all-inclusive bundled pricing based on full costs.。

Implement the policy of “no reimbursement for overspending, retention of surplus funds” to change the medical practices of hospitals and healthcare professionals, encourage treatment based on patients’ conditions, curb excessive medication and over-testing, standardize medical services, optimize cost structures, and reduce service costs, thereby achieving the goal of controlling unreasonable growth in healthcare expenditures.

As basic medical insurance achieves universal coverage and the government continues to raise fiscal subsidy standards, the proportion of medical insurance settlement funds in the revenue of public hospitals will increase year by year.

However, the medical insurance system can only impose aggregate cost controls on medical expenses covered within its scope. Expenses related to government-funded medical care, commercial insurance, items excluded from the medical insurance catalog, and out-of-pocket payments by self-paying patients fall outside the scope of medical insurance coverage and are not subject to cost containment measures under the reform of medical insurance payment methods.

In recent years, reforms in payment methods such as global budget prepayment implemented across various regions have, judging from their implementation effects,Out-of-pocket medical expenses outside the scope of policy coverage have not been alleviated, the proportion of individual out-of-pocket payments has not significantly decreased, and the reform’s constraints on cost control remain weak.。

Reform of the DRG-based payment system,By comprehensively addressing pricing structures in medical institutions, health insurance coverage, and patient payment responsibilities, this approach ensures that patients are clearly informed of cost standards while their conditions are diagnosed and treatment plans are determined, thereby eliminating the possibility of arbitrary fee increases by medical institutions.。

Meanwhile, the DRG-based payment reform aims to maximize the actual reimbursement rate of medical insurance, alleviate patients’ financial burden, and ensure that insured residents benefit from the reform as much as possible.

On the basis of ensuring medical quality, by setting different bundled payment standards for different diseases at different levels of medical and health institutions, an economic leverage effect is exerted on both the behavior of demand-side patients and supply-side providers.

Guide medical institutions to admit patients with conditions that match their service capabilities; direct the management of common diseases, simple cases, and certain outpatient services to primary care institutions; encourage hospitals at Level II and above to refer chronic disease patients with clear diagnoses and stable conditions downward, while proactively assuming responsibility for complex and difficult cases.

Encourage and guide patients to seek medical care at primary healthcare institutions, thereby alleviating overcrowding and the strain on medical resources in large hospitals, and promoting the establishment of a tiered diagnosis and treatment system.

Meanwhile,It can also be used in conjunction with reforms to various payment and reimbursement models.，such as capitation, global budgets for outpatient and inpatient services, or single-disease bundled payments, encourage medical institutions to carry out preventive and healthcare services well, minimize the occurrence of diseases as much as possible, thereby reducing healthcare expenditures, embodying the integration of prevention and treatment, and achieving the ultimate goal of healthcare reform.

To implement the DRG-based payment and charging reform, it is essential to first establish a comprehensive institutional framework and standardize foundational support tools. To facilitate the pilot program, the National Health and Family Planning Commission has developed the C-DRG Payment and Charging Specifications and established a nationwide cost monitoring platform.

Next,The National Health and Family Planning Commission will standardize disease classification and coding, surgical procedure coding, medical service price item coding, and the front page of medical records across China.。

This enables the nationwide standardization of medical data and the establishment of a comparable and analyzable big data system for healthcare, which not only supports DRG-based payment reforms but also provides robust support for clinical decision-making, medical quality supervision, research assistance, and personalized treatment.

Establishing a modern hospital management system is one of the key tasks in the healthcare and pharmaceutical system reform. Payment based on Diagnosis-Related Groups (DRG) willEstablish a management model centered on cost and quality control, to promote the accelerated establishment of standardized internal financial management systems in medical institutions, strengthen cost accounting and control, reduce healthcare service costs, and improve hospital operational efficiency;Standardize clinical examination, diagnosis, treatment, and medication practices in public hospitals to eliminate excessive prescriptions and unnecessary tests.。

Under the DRG-based payment and charging system, it is also necessary to establish a distribution mechanism centered on service quality and patient satisfaction, reform internal personnel management and incentive structures, and shift the performance evaluation of medical institutions and healthcare professionals from economic benefits to social benefits, thereby reflecting the professional value of their labor.

DRG Payment and Charging WillImprove the electronic medical record-based information system, facilitating the strengthening of internal hospital management and improving the service quality and standards of public hospitals.

Currently, the natural growth of medical expenditures in China is driven by a combination of factors, including population aging, rising demand for healthcare services, increasing labor and material costs, and the widespread adoption of advanced medical technologies, pharmaceuticals, and diagnostic techniques.

The growth of medical expenses is an objective law and a universal trend in the development of healthcare systems worldwide. However, unreasonable cost increases have also occurred to some extent due to factors such as flawed compensation mechanisms for medical institutions, distorted pricing of medical services, and multi-layered markups in the distribution channels for pharmaceuticals and medical consumables, which have led to artificially inflated costs.

Implementing DRG-based payment reform aims to curb unreasonable cost growth while respecting the natural trajectory of medical expenditure increases.Therefore, when formulating payment and charging policies and standards, full consideration should be given to the reasonable growth of medical expenses. It is essential to examine the relationship between the growth rate of health insurance fund contributions, the rate of increase in medical costs, and patients’ affordability. Cost projections should be conducted through healthcare service cost accounting and health insurance actuarial analysis, thereby achieving a balance between payers and providers.