Standard costing concepts have been applied in the health-care industry. For example, diagnostic related groups (DRGs) are used for prospective payments for Medicare patients. Select a search engine and conduct a search to see what information you can obtain about DRGs. You might try "medicare DRGs" as a possible search topic. Use the following questions to prepare a memo regarding the results of your search:
a. What is a DRG?
b. How are DRGs established?
c. How many DRGs are used?
d. How does the DRG concept relate to the standard costing concepts discussed? Can hospitals use DRGs to control their costs? Explain.
e. What are severity DRGs? Explain how they are connected to standard costing concepts.
f. Are private insurance firms using DRGs?