Abstract Background China’s healthcare expenditure has grown rapidly, prompting nationwide implementation of prospective payment reforms—Diagnosis Related Groups (DRG) and Diagnosis-Intervention Packet (DIP)—to control costs and improve efficiency. However, evidence on their effectiveness and unintended consequences, particularly for complex, high-cost diseases, remains limited. Methods We conducted a staggered difference-in-differences analysis using comprehensive hospitalization data from 175,414 respiratory tumor patients across Sichuan Province (2016-2024), encompassing the complete reform implementation period. We evaluated impacts on healthcare costs, cost structure, and quality metrics (readmission rates, length of stay, mortality), comparing DRG versus DIP effects and examining heterogeneity across hospital tiers, patient age groups, geographic locations, and insurance types. Results Both payment systems achieved substantial cost reductions, with DRG demonstrating greater effectiveness (15.58% reduction) compared to DIP (5.65%). Reforms restructured cost composition, significantly decreasing medication expenses (-1.02%), consumables (-1.45%), and service fees (-0.65%) while increasing treatment costs (+1.01%). However, DRG implementation raised significant quality concerns: 15-day readmission rates increased by 0.71%, 30-day rates by 2.24%, and 90-day rates by 3.30%, alongside reduced length of stay (-0.27 days), elevated comorbidity diagnoses (+1.25%), increased low-standard admissions (+3.87%), and higher in-hospital mortality (+0.29%). DIP reform showed no significant quality impacts. Heterogeneity analysis revealed differential effects: tertiary hospitals achieved greater cost reductions but maintained safety better than non-tertiary facilities; adult patients experienced larger cost decreases but higher readmissions, while elderly patients showed increased mortality (+0.6%); urban hospitals demonstrated more comprehensive transformation than rural facilities, where mortality increased significantly despite modest cost containment; and reforms impacted urban employee insurance beneficiaries more substantially than rural resident insurance holders. Conclusions China’s prospective payment reforms effectively contained healthcare costs but introduced concerning quality deterioration, particularly under DRG systems. Effects varied substantially across institutional capabilities and patient populations, with vulnerable groups—elderly patients, rural facilities, and resource-constrained hospitals—experiencing disproportionate adverse outcomes. These findings underscore that payment reform design and differentiated implementation strategies are as critical as cost-containment objectives. Policymakers must strengthen quality monitoring infrastructure, develop risk-adjusted payment mechanisms for vulnerable populations, provide capacity-building support for resource-limited institutions, and adopt gradual implementation approaches with robust evaluation systems. Without such safeguards, efficiency-driven reforms risk exacerbating healthcare inequities and compromising fundamental quality standards, particularly for complex diseases requiring intensive resource utilization. This abstract is funded by: None
Tang et al. (Fri,) studied this question.