The diagnosis-related groups (DRGs) payment system was established in the 1960s. Details of DRG-based payment system vary by country. The Diagnosis-Related Group payments system in Taiwan (Tw-DRG) was established in 2009 in order to contain medical costs and enhance medical efficiency under a universal coverage, single-payment insurance system: National Health Insurance (NHI). This capstone reviews the study literature about the history of DRGs payment system establishment, processes of medical reform, as well as the implementation and outcomes of Tw-DRGS. According to the studies reviewed there were changes of medical behaviors after the implementation of Tw-DRGs which included an increase of medical efficiency and an slightly declining intensity of care which are indicated by the number of order for medication, diagnosis and treatment during hospitalization. No significant change was found in patient health outcomes. The financial impacts on different levels of hospitals, departments or specific clinical items varied. Generally, the profitability was negatively impacted. Another potential problem noted concerns the disease severity and explanatory power of Tw-DRGs. Higher illness severity was related to more medical resource utilization. Due to the lower explanatory power of Tw-DRGs, there exists a lack of accounting for illness severity could lead to cost shifting or patient dumping.