Diagnosis-Related-Groups (DRGs) constitute which type of payment program for Medicare patients?

Diagnosis-Related Groups (DRGs) are integral to the Medicare payment system, representing a prospective payment model. In this framework, the payment amount is established in advance based on the patient's diagnosis and the complexity of the care needed, rather than being determined after the services have been provided. This predetermined payment system encourages efficiency and cost-effectiveness in hospital care, as hospitals receive a fixed amount according to the DRG classification for each hospitalization, regardless of the actual services rendered or the length of stay.

The prospective nature of DRGs contrasts sharply with retrospective payment models, where payments are made after services are rendered, based on incurred costs. In a fee-for-service model, providers are paid for each individual service or procedure performed, which does not align with the DRG system that incentivizes bundled payments for comprehensive care. Additionally, capitated payment models involve fixed payments for a defined patient population regardless of actual services utilized, which also differs from the DRG approach. Understanding that DRGs operate on a fixed, pre-established reimbursement scheme clarifies why this option is correct in the context of payment programs for Medicare patients.