Beijing, Aug 31, 2026 — China’s National Healthcare Security Administration (NHSA) released the 3.0 version grouping schemes for Diagnosis-Related Group (DRG) and Diagnosis-Intervention Packet (DIP) payment systems, expanding coverage to 825 DRG subgroups and 5,125 DIP core disease categories as the nation deepens hospital cost control reforms with a March 2027 implementation deadline.

Policy Snapshot

Key Provisions

• Implementation timeline — Regions and hospitals using disease-based payment must complete system switching preparation by Dec 31, 2026, and fully deploy the 3.0 grouping by end-March 2027. Provincial authorities may adapt the national framework to local conditions while maintaining consistency with core national DRG groups and DIP categories.
• Primary care alignment — The 3.0 scheme introduces 31 DRG primary care groups and 127 DIP primary care categories, requiring uniform payment rates for the same disease across hospital tiers within a pooling region. This “same disease, same payment” rule aims to divert patient flow toward grassroots facilities.
• Data quality mandate — Hospitals must strictly follow national medical insurance settlement list standards, accurately use NHSA diagnostic and procedure codes, and upload settlement data promptly to ensure accurate case grouping.
• Budget management — Pooling regions must strengthen total expenditure management based on fund budgets, with provisions to reserve a portion of annual funds to balance policy adjustments and service volume fluctuations. Some regions may explore quarterly or monthly allocation of disease-based payment budgets.
• Payment standard calibration — Provincial authorities should guide pooling regions to calculate disease weights, point values, and payment rates based on fund performance, disease spectrum changes, historical medical data, and medical technology innovation. Flexible rate mechanisms are encouraged, including fixed rates for baseline volumes and floating rates for incremental volumes.
• Outlier case mechanism — DRG outlier case reviews are capped at 5% of total discharged cases; DIP outlier reviews are adjusted to no more than 1% of discharged cases from 2027. The quota is allocated at the pooling region level rather than evenly distributed across individual hospitals.
• Settlement efficiency — Regions must advance real-time settlement systems, expand the share of funds settled in real time, and implement a three-year action plan to accelerate clearing and optimize payment structures. Quarterly clearing is encouraged.
• Surplus and deficit sharing — Hospitals retaining surpluses under the disease-based payment system may use the funds for disciplinary development and staff performance. Reasonable overruns caused by major policy adjustments or infectious disease outbreaks are shared proportionally between the insurance fund and hospitals.
• Cross-region care — Provinces must unify disease grouping, payment calculation methods, and administrative management for intra-provincial cross-region hospitalization under disease-based payment. Cross-provincial direct settlement under disease-based payment will be gradually advanced.
• Data transparency — A normalized data publication mechanism will be established through the national medical insurance information platform, with automatic data push and dynamic monitoring. Regions should conduct thematic analysis on at least five high-volume or high-cost diseases annually and share results with designated hospitals.

Market Impact Analysis

The 3.0 grouping represents the most significant refinement of China’s hospital payment reform since the initial DRG/DIP rollout, tightening cost control while introducing flexibility mechanisms to protect clinical innovation and rare cases. The expansion to 825 DRG subgroups and 5,125 DIP categories allows more precise case matching, reducing the “upcoding” and service distortion incentives that plagued broader grouping systems.

The primary care “same disease, same payment” provision is a structural market-shifter. By equalizing reimbursement across hospital tiers for 31 DRG and 127 DIP primary care conditions, regulators are explicitly steering hypertension, diabetes, and common respiratory infections toward community health centers and township hospitals. This threatens revenue streams for tier-two and tier-three hospitals that have historically relied on high outpatient volumes for chronic disease management.

The outlier case caps—5% for DRG and 1% for DIP—strike a balance between cost discipline and clinical reality, though the low DIP threshold may pressure hospitals to avoid complex cases or shift them to non-DIP payment tracks. The encouragement of flexible rates (fixed for baseline, floating for incremental volumes) introduces market-like pricing dynamics that could reward efficient hospitals while penalizing high-cost outliers.

The cross-region unification mandate is critical for national portability, ensuring that patients seeking care outside their home city face consistent grouping and payment rules. This reduces administrative friction but may force high-cost regions to align with lower-cost provincial benchmarks.

Forward-Looking Statement

Healthcare analysts expect the Dec 31, 2026, preparation deadline to trigger a wave of hospital information system upgrades and staff training investments in the fourth quarter. The March 2027 implementation date aligns with the start of China’s fiscal and planning year, ensuring full-year budget calibration under the new groups. Hospitals in advanced pilot regions—such as Zhejiang, Guangdong, and Shanghai—are likely to transition smoothly, while western provinces may face delays due to weaker IT infrastructure and smaller fund pools.

The 3.0 grouping is expected to accelerate hospital consolidation, as smaller facilities struggle to manage the data quality and coding precision required for accurate case grouping. Pharmaceutical and device manufacturers should anticipate continued downward price pressure, as the refined groups leave less room for hospitals to absorb premium product costs within standard payment bundles. The thematic disease analysis requirement (minimum five diseases annually) will create a feedback loop where high-cost therapies face heightened scrutiny, potentially influencing formulary decisions and procurement negotiations.-China Health Reform Pulse

Policy Source: https://www.nhsa.gov.cn/art/2026/9/2/art_104_21975.html?sessionid=