Fee-for-service (FFS) refers to a payment model where hospitals are paid for each specific service they provide, such as examinations, prescriptions, and treatments.
In contrast, diagnosis-related groups (DRG) represent a system where a daily rate for payment is predetermined by the state based on the diagnosis or reason for a patient's hospital stay. Under this system, this set payment is made for every day that the patient stays in hospital. All services provided are funded from this daily rate, and any remaining funds become the hospital's revenue. Notably, certain costly services like surgeries, expensive medications, and radiation therapy are considered exceptions and are billed separately per service.