Refinements to the Diagnostic Cost Group (DCG) model

UMMS Affiliation

Department of Quantitative Health Sciences

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Document Type



Aged; Aged, 80 and over; Capitation Fee; Costs and Cost Analysis; Diagnosis-Related Groups; Female; Health Expenditures; Health Maintenance Organizations; Hospitalization; Humans; Length of Stay; Linear Models; Male; Medicare; *Models, Economic; Mortality; Reimbursement Mechanisms; Sensitivity and Specificity; United States


Biostatistics | Epidemiology | Health Services Research


The Diagnostic Cost Group (DCG) model, originally developed by Ash et al. (1986, 1989), has been proposed as an alternative to the existing payment system for reimbursing Medicare health maintenance organizations, the Adjusted Average Per Capita Cost (AAPCC). The DCG model is a linear regression model that uses both demographic and diagnostic information to predict total plan payments for health care. This paper extends previous work by estimating the model using 1984-85 data and by developing a more thorough method for classifying hospitalizations by degrees of discretion. It also explores the loss of predictive power resulting from not using diagnoses for the most discretionary hospitalizations for calculating payments. The paper examines a number of extensions and refinements to the basic DCG model.


Inquiry. 1995-1996 Winter;32(4):418-29.

Journal/Book/Conference Title

Inquiry : a journal of medical care organization, provision and financing

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