Evaluating departmental performance and reimbursement–cost pricing distortions under DRG-based payment: evidence from a tertiary hospital in China

BACKGROUND: Diagnosis-Related Group (DRG)-based payment reform aims to improve efficiency and restrain unnecessary expenditure, yet routine hospital indicators often report case mix, cost deviation, and profitability separately. This separation may obscure whether an unfavorable departmental profile reflects low cost-adjusted weighted output, reimbursement-cost misalignment, or an adverse position within the complexity-profitability distribution. OBJECTIVE: This study develops and applies a DRG-Based Profitability-Efficiency Mapping (DRG-PEM) framework to evaluate departmental performance and identify reimbursement-cost pricing distortions within a DRG-based payment system. METHODS: A retrospective analysis was conducted using discharge and cost data from 29 clinical departments in a large tertiary general hospital in China between January and June 2022. The analytical workbook contained 25,379 discharges, 1,962 department-DRG group records, and 595 unique DRG codes. DRG-PEM integrates three sequential modules: the Structural Efficiency Score (SES), the Weight-Cost Deviation Index (WCDI), and a DRG profitability-complexity quadrant map. Scenario simulation was performed for high-deviation DRG groups meeting predefined criteria: baseline WCDI > 40%, theoretical reimbursement below observed cost, complete cost data, and stable department-level case volume. RESULTS: SES values ranged from 23.86 in Pulmonary Medicine to 71.38 in Stomatology, demonstrating substantial interdepartmental heterogeneity. WCDI values ranged from 31.77% in Urology to 84.56% in Stomatology; similarly high values were observed in Pediatrics (83.72%), Pain Medicine (76.51%), and Anorectal Traditional Chinese Medicine (63.75%). Directional financial indicators showed that high WCDI did not uniformly indicate under-reimbursement: Stomatology had high WCDI but positive average profit per case, whereas ICU combined high CMI (1.81), negative average profit per case (-¥11,286.44), and severe WCDI (46.07%). Scenario simulations showed that reimbursement-to-cost ratios improved after hypothetical weight increases but remained below 1.0 for several high-deviation groups. CONCLUSIONS: DRG-PEM provides an implementable department-level framework for distinguishing cost-adjusted weighted output, reimbursement deviation, and structural financial risk under DRG payment. The framework supports integrated assessment of departmental performance and can inform targeted DRG weight adjustment, cost control, and internal resource allocation and institutional operational governance.