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Expansion of the mandatory application of DRG payment system for seven disease groups to more hospitals and clinics as of this July

  • Date : 2012-02-20
  • Hit : 5066

Expansion of the mandatory application of DRG payment system for seven disease groups to more hospitals and clinics as of this July

Resolution on the date of the implementation of the DRG payment system improvement plan, etc finalized by the Health Insurance Policy Review Committee

< Caesarean section~~I want to go to hospital that has adopted the DRG payment system!! >

Ms. Lee gave birth to a child through Caesarean section at A hospital. 1.70 million won of expenses were incurred including hospitalization, meals, anesthesia and surgery, etc and she paid 750 thousand won. In the case of her friend, Ms. Kim, who was hospitalized in B hospital for a week, 1.50 million won of expenses were charged and only 270 thousand won was paid by her.


Ms. Lee (fee for service)

Lee’s friend, Ms. Kim (DRG payment system)

Total medical cost (A+B)

1,746,610 won

1,501,180 won

Portion born by individual

(benefit 20% + non-benefit 100%)

746,570 won

270,920 won

Portion covered by insurance

1,000,040 won

1,230,260 won

Medical expenses

Benefit (A)

1,276,610 won

1,501,180 won

Non-benefit (B)

470,000 won


* The costs applied as non-benefit to both hospitals such as different amount for a higher level hospital room, selective medical treatment expenses, ultrasonic wave cost, etc are excluded.

Ms. Lee checked the receipt to see where the difference between two hospitals is in terms of expenses incurred and found that in her receipt, nutritional supplements, anemia medicine, etc were listed as non-benefit items while they were not in her friend’s receipt. She sought why they were charged as non-benefit items at her hospital but not at her friend’s hospital.

It was because the hospital where her friend was admitted was under DRG payment system. When DRG payment system was applied, most non-benefit items are covered by the insurance benefit. Therefore, a patient only has to pay a small portion of medical expenses and even before hospitalized, he/she can get a rough estimation of medical costs to be incurred.

Ms. Lee thought that if she had known the system in advance and gone to a DRG payment system-applied hospital instead, she would have been able to know how much it would cost and forecast her household expenses for the following month as well as could have lessened the burden of medical expenditure. She also wondered why the government is not applying this system to all medical institutions.

Ministry of Health and Welfare (Minister Rim, Chae Min) passed a resolution of the DRG payment system improvement plan by convening the Health Insurance Policy Review Committee at 15:00 on 15 Feb.

DRG Payment System will be mandatorily applied to all hospital and clinic –level medical institutions as of July this year and to all levels including general hospitals starting from Jul. next year for patients subject to the seven disease groups.

* The implementation schedule of the expanded application of DRG payment system to general hospitals may be sooner than Jul. next year if the revised payment system is ready sooner.

- (Application subjects) patients hospitalized to receive appendectomy, herniotomy surgery, hemorrhoids surgery, cataract surgery, tonsillectomy, caesarean section, and adnexa operation

- (Participation) selective participation → mandatory participation (mandatory application)

DRG Payment System-applied Hospitals and Clinics

(Unit: thousand case, %)

Selective application

Mandatory application

Additional application


No. of institutions

No. of cases

No. of institutions

No. of cases

No. of institutions

No. of cases




























* From Jan. 2011 to Nov. 2011 based on medical institutions to which seven disease groups are charged

The DRG payment system applied institutions will be rewarded with fixed amounts regardless of quantity of benefit or non-benefit services they provide and patients are less burdened with non-benefit costs.

- (Payment Reward Method) Non-participating medical institutions will be rewarded individually for its service activities according to frequency and amount of service, medical treatment material and drug items.

Rewarded in a bundle with fixed DRG payment amounts (including service, treatment material and drug costs) according to names of diseases diagnosed, names of surgeries and treatments, accompanied diseases, etc

- (To be burdened by patient) Benefit item (some to be paid by individual: 20%, whole amount to be paid by individual 100%), non-benefit item (whole amount to be paid by individual 100%)

Non-benefit and benefit items to be paid by individual are changed to benefit items the cost of which only 20% is to be covered by individual

In the meantime, the rationalization of the DRG payment level, and the adjustment mechanism rule for the DRG payment system, the patient categorization system improvement and the quality evaluation method

- will be swiftly discussed with the “DRG Payment System Improvement Discussion Body”* including items decided by the Health Insurance Policy Review Committee.

* The body consists of experts from various areas including the academia, the medical field, etc (13 persons) and has been run since Nov.

[Major Tasks in Detail]




Rationalization of DRG Payment System

May 2012

Revision of the case payment compared to the “fee for service,” and financial requirement, etc

* DRG Payment System revision to be notified

(Decided by the Health Insurance Policy Review Committee after going through the disease group –specific assessment committee)

Streamlining of the patient categorization system for seven disease groups

May 2012

Improvement to be prepared considering severity level, variety of treatments, medical development, etc

* To be applied when the DRG payment system revision is notified.

Introduction of pilot assessment of benefit appropriateness

May 2012

Quality indicator development and assessment plan to be prepared such as the occurrence rate of complications and the re-hospitalization rate, etc jointly by the medical community and the Health Insurance Review and Assessment Service

Review of the expansion of applied disease groups

Jul. 2012

Review the possibility of application based on the expansion of demand for applicable disease groups

Implementation of objective policy evaluation

Jul. 2012

Analysis of costs including selective treatment expense, etc and the analysis of quality level and conversion of costs to outpatient expenses, and study of foreign countries’ cases and lessons from them

* Outside experts hired by the National Health Insurance Corporation

Regulation of the adjustment mechanism for the DRG payment system

Dec. 2012

Detailed methods such as adjustment principles, methods, frequency, procedures, etc to be prepared

* The Health Insurance Review and Assessment Service regulates a related rule by preparing a draft through hiring outside experts for study and research

In addition, related tasks such as the trial clinic guideline development support (from 2012) and the establishment of the prime cost data collection system (2013) will be examined and studied with the medical field in order to prepare mid and long-term development plans.

- The plans will be prepared with sufficient time investment and the cooperation* system will be reinforced such as related financial support from the government so that the medical field may participate with more sense of responsibility.

* The matching fund of 10~20 % to ensure greater sense of responsibility for the medical field’s participation in policy development

The DRG payment system expansion by phase was recommended by the committee of vision for health care (Aug. 2011) and it was reported to the Health Insurance Policy Review Committee (Aug. and Dec. 2011).

Korean Hospital Association included the expansion of the DRG Payment system for the seven disease groups for 2012 as a condition for the case payment contract. (Health Insurance Policy Review Committee in Nov. 2011)

Ministry of Health and Welfare said that it would soon revise the enforcement decree of the Act on Health Insurance that includes the implementation time, the newly established regulation for the patient categorization system.

The revised DRG Payment System reflecting the realigned patient categorization system for seven disease groups will be finalized and notified after passing through the disease group-specific assessment committee and the Health Insurance Policy Review Committee by May based on the result of the discussion conducted by the discussion body.

< Medical Cost Aid for Pregnancy and Childbirth and Medical Treatment Material Management System Plan, etc >

(Medical Cost for Pregnancy and Childbirth) A program called “Go-un Mom Card” that provides an

aid of 400 thousand won (500 thousand won in Apr. 2012) to pregnant women in support of before-delivery

treatments and delivery, etc. will be available at maternal nursing institutions (44 places nationwide)

starting from Apr. this year.

Mothers pregnant with more than one baby will be provided with additional 200 thousand won (700

thousand won in total) and this will be applied as of Jul. this year.

Ministry of Health and Welfare said that it expects that pregnant mothers who use maternal nursing

institutions will have an expanded range of choices and mothers pregnant with more than one baby wil

have less financial burdens through the revision of the system this time.

In addition, the “Medical Treatment Materials Management System Improvement Plan” was reported.

* Medical treatment materials; medical devices that medical staff use in treatments of patients and

surgeries such as bandage, artificial joints and stent, etc

In the meantime, as the medical treatment materials account for a small share* of the health insurance compared to medical service activities and drugs and rebate issues haven’t been seriously highlighted, thorough management was not sufficiently carried out.

* Health Insurance Benefits: medical service activities (35%,16 trillion won) > drugs (32%,12 trillion won) >

treatment material (4.5%, 1.9 trillion won)

Recently, the increase rate of the treatment material benefits is around 16%, revolving above the entire health insurance benefit increase rate (12%).

- It is determined that the reason is that there is insufficient benefits that encourage medical institutions to

select cost-effective medical treatment materials under the fee for service payment system and there is a

lack of system that controls prices on a regular basis.

-In the meantime, some companies that have exclusive market shares sometimes stop supply of

materials asking for the maximum prices and some provide materials charging prices beyond the

maximum rates to medical institutions, causing inconvenience to patients.

To resolve such problems, Ministry of Health and Welfare said that it will be preparing the pricing and adjustment scheme as below.

Improvement of the pricing scheme

-To encourage medical institutions to use cost-effective treatment materials, the fixed amount payment

system that provides a reward in a bundle for materials used for a certain activity will be expanded.

- Medical treatment materials that are essential for treatment but are expected to cause obstacle to

treatment due to decrease of demand and supply will be designated as items subject to prevention of

supply withdrawal and prime costs of them will be compensated so that there will be no problem to patient


Improvement of Price Adjustment Scheme

-Furthermore, a mechanism to control prices by linking prices to changes of use volumes and a

mechanism to adjust prices of medical treatment materials which are related to illegal rebate practices

found, etc will be prepared.

Ministry of Health and Welfare said that it will implement the revised scheme in the second half of the year after revising the detailed improvement plan and a related law.

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