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DRGs, or diagnostic-related groups, are the predetermined amounts that Medicaid and Medicare will cover for treating particular medical problems.

Diagnostic-related groups are used by Medicare (and some health insurance companies) to categorize hospitalization costs and determine how much to pay for your hospital stay (DRGs). Instead of paying the hospital for each distinct treatment it provides, Medicare or private insurers will pay a predetermined amount depending on your diagnostic-related group.

The DRG system was developed to ensure you get the services you need without paying for unnecessary extras. The phrase "diagnostic-related grouping" describes a set of metrics that are used to classify the resources needed to treat you in accordance with your diagnosis, prognosis, and other factors.

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