Abstract: In recent years, the implementation of the diagnosis-related groups (DRG) payment system has exerted multifaceted impacts on hospital management. While DRG enhances the efficiency and quality of hospital management, its adoption still faces numerous challenges. This paper reviews the impacts of DRG on hospital management practices, healthcare professionals, as well as patients and their families. It summarizes existing advantages and implementation difficulties, discusses the system's strengths and limitations in hospital management, and proposes improvement strategies and development directions to address current issues. The findings aim to provide references for optimizing institutional frameworks and advancing practical measures in hospital management under China's DRG reform.