Background: Diagnosis procedure combination (DPC) has recently been introduced in Korea as a demonstration project and it has aimed the improvement of accuracy in bundled payment instead of Diagnosis related group (DRG). The purpose of this study is to investigate that the model of end-stage liver disease (MELD) score as the severity classification of liver diseases is adequate for improving reimbursement of DPC. Methods: The subjects of this study were 329 patients of liver disease (Korean DRG ver. 3.2 H603) who had discharged from National Health Insurance Corporation Ilsan Hospital which is target hospital of DPC demonstration project, between January 1, 2007 and July 31, 2010. We tested the cost differences by severity classifications which were DRG severity classification and clinical severity classification-MELD score. We used a multiple regression model to find the impacts of severity on total medical cost controlling for demographic factor and characteristics of medical services. The within group homogeneity of cost were measured by calculating the coefficient of variation and extremal quotient. Results: This study investigates the relationship between medical costs and other variables especially severity classifications of liver disease. Length of stay has strong effect on medical costs and other characteristics of patients or episode also effect on medical costs. MELD score for severity classification explained the variation of costs more than DRG severity classification. Conclusion: The accuracy of DRG based payment might be improved by using various clinical data collected by clinical situations but it should have objectivity with considering availability. Adequate compensation for severity should be considered mainly in DRG based payment. Disease specific severity classification would be an alternative like MELD score for liver diseases.