ObjectiveAs few studies have evaluated the policy effects of the Chinese simplified DRGs-PPS systematically, this research aims to assess its policy effects and to provide insight for other developing regions that are undergoing the same reform. MethodsThe history and major problems of the Chinese DRGs-PPS were analyzed qualitatively. Moreover, the efficiency (average hospitalization cost; length of stay, LOS) and equity of the simplified DRGs-PPS were examined at both macro and micro levels. ResultsAs of today, only 20 of the 32 provinces in mainland China had implemented the simplified DRGs. There were also huge differences in terms of the number and categories of diseases among the various provinces involved. Literature review showed that " lack of rationale in setting payment standards" , "limited diseases are included into the DRGs categories" and "lack of regulation to avoid ethical risks of health service providers" were the frequently cited problems. On the macro level, the national average medical cost had increased while the average LOS had been relatively stable from the year 2004 onwards, and simplified DRGs had been implemented widely since 2004 while discrepancies existed in various provinces. On the micro level, among the studies that focused on assessing hospitals with statistical test, 78% (11/14) of these studies revealed that hospitalization cost could be reduced and 60% (6/10) of them indicated that LOS could be reduced. ConclusionBy comparing the policy effects at both macro and micro levels, we conclude that the simplified DRGs are useful in controlling hospitalization cost but they fail to reduce LOS. Also much more still needs to be done in China to facilitate the transition from simplified DRGs to genuine DRGs.