OBJECTIVES: Financing of hospital services in Germany is presently transformed to a DRG-based system destined to derive 100% of the hospital revenue. The aim of this study is to determine whether the German DRG based reimbursement provides adequate coverage of actual costs of intensive care unit (ICU) patients. METHODS: Retrospective analysis of ICU length of stay (LOS) and direct cost data extracted from patients' electronic records from the surgical ICU of the University Hospital Göttingen, Germany. Cost calculations performed for 1187 patients with LOS > 24 hours over a 24-month period (January 1, 2000 -Decemeber 31, 2001). ICU reimbursement calculations based on the specific G-DRG according to the individual diagnosis and the fixed ICU proportion of the G-DRG reimbursement. Direct variable cost (consumables) were assessed bottom-up by means of a patient data management system. Personnel cost were calculated per day of treatment. Actual total costs were compared with the hypothetical DRG reimbursement. RESULTS: Total actual cost for ICU services was €5.58 million (mean per patient: €4697), while the corresponding DRG-based total reimbursement was €2.98 million (mean per patient: €.513). The cost deficit is statistically significant (P <0.001). Underfunding of the costs was evident in most DRG classifications, some with reimbursement deficits of over 80%. These differences showed a significant and negative linear correlation with ICU LOS (R = -0.593, p <0.001). CONCLUSIONS: The computed G-DRG based reimbursement for ICU services differed significantly from the actual costs incurred. These findings highlight the importance of a more realistic and fair DRG-based reimbursement of hospital ICU services in Germany, particularly with respect to patients with extended LOS.