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Hospitals are now being reimbursed by a prospective Diagnosis-Related Group (DRG) classification system. There have been no major changes in the Federal Medicare DRG classification system since its inception 5 years ago. In this project, we analyzed all gastrointestinal (GI) medicine admissions by age and resource utilization at a large academic medical center. Total hospital costs for the 3,598 GI patients (January 1, 1985, through December 31, 1987) were $18,460,604. Although DRG reimbursement for all patients for the 3-year period would have generated an aggregate profit of $957,760, four out of five age categories of patients 65 years of age and above would have generated losses; the highest loss was for patients 85 years and over, at $2,235 per patient. Older GI patients (i.e., 65 years and over) had higher hospital costs, longer lengths of stay, more diagnoses and procedures per patient, and a higher mortality rate than younger patients. Both intensive care unit (ICU) and blood utilization rose with age. Thus, older GI patients consumed a disproportionately larger share of hospital resources. Our study suggests that the current DRG reimbursement scheme may be inequitable relative to the older GI medicine patient; financial disincentives from DRGs may affect elderly patients' access to and quality of care in the future.