Exploring the Ethical Concerns of Diagnosis‐Related Group System in Healthcare: Lessons and Recommendations for Malaysia

ABSTRACT

The Diagnosis‐Related Group (DRG) system has had a significant impact on the healthcare community, particularly in areas of financial management and care quality monitoring. It is widely implemented as a hospital reimbursement model aimed at controlling costs while improving efficiency. However, the system has given rise to several ethical concerns, including the risks of under‐treatment, upcoding, inequitable access to care and moral distress and burnout among physicians. This article explores these ethical dilemmas in depth and discusses various mitigation strategies, such as DRG modifications, ethical safeguards and hybrid reimbursement models. Special attention is given to the Malaysian healthcare context, with recommendations tailored to address the ethical challenges unique to its dual healthcare system. The goal is to ensure that cost‐effectiveness is achieved without compromising the quality and equity of patient care.