The ability of diagnosis related groups (DRG) and refinement diagnosis related groups (RDRG) to measure differences in case-mix was investigated using discharge data for patients < 18 years of age from three specialist children's hospitals and four district hospitals. While the three children's hospitals each had a greater percentage of RDRG for more complex patients, only one children's hospital had more complex patients based on DRG and RDRG cost weights and on the percentage of diagnoses per discharge. Cost weights based on USA practices may be inappropriate in Australia, and Australian weights will be necessary for firm conclusions. Refinement diagnosis related groups with appropriate cost weights may be acceptable measures of case-mix in specialist children's hospitals, but they have inherent limitations for paediatric patients in that many complex paediatric patients are ill very seriously with one disorder, whereas complex adult patients usually have secondary diagnoses and secondary procedures. Moreover, no DRG version developed in the US will be suitable for use in Australia unless it takes account of medical costs and transfer practice.
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