Bulletin of the World Health Organization

Hospital payment systems based on diagnosis-related groups: experiences in low- and middle-income countries

Inke Mathauer & Friedrich Wittenbecher


This paper provides a comprehensive overview of hospital payment systems based on diagnosis-related groups (DRGs) in low- and middle-income countries. It also explores design and implementation issues and the related challenges countries face.


A literature research for papers on DRG-based payment systems in low- and middle-income countries was conducted in English, French and Spanish through Pubmed, the Pan American Health Organization’s Regional Library of Medicine and Google.


Twelve low- and middle-income countries have DRG-based payment systems and another 17 are in the piloting or exploratory stage. Countries have chosen from a wide range of imported and self-developed DRG models and most have adapted such models to their specific contexts. All countries have set expenditure ceilings. In general, systems were piloted before being implemented. The need to meet certain requirements in terms of coding standardization, data availability and information technology made implementation difficult. Private sector providers have not been fully integrated, but most countries have managed to delink hospital financing from public finance budgeting.


Although more evidence on the impact of DRG-based payment systems is needed, our findings suggest that (i) the greater portion of health-care financing should be public rather than private; (ii) it is advisable to pilot systems first and to establish expenditure ceilings; (iii) countries that import an existing variant of a DRG-based system should be mindful of the need for adaptation; and (iv) countries should promote the cooperation of providers for appropriate data generation and claims management.