This $101,889 CMB Open Competition (CMB-OC) grant in HPSS aims to evaluate the impact of Beijing’s Diagnosis-Related-Groups (DRG) payment reform on health expenditure and quality of care, and to identify barriers and preconditions necessary for successful implementation of DRG reform. Using hospital discharge data, inpatient claims data, and inpatient and outpatient expenditure data 2009-2014 (three years pre- and post-reform), the study applies a differences-in-differences (DID) design with propensity score matching (PSM) to evaluate the impact of reform on medical expenditure, treatment pattern, and medical service quality by comparing these outcome variables between the 6 reform hospitals and 6 control hospitals before and after the reform.