The adoption by Medicare in 1983 of prospective payment using diagnosis-related groups (DRGs) has stimulated research to develop case-mix grouping schemes that more accurately predict resource consumption by patients. In this article, the authors explore a new method designed to improve case-mix classification for newborns through the use of birth weight in combination with DRGs to adjust the unexplained case-mix severity. Although the findings are developmental in nature, they reveal that the model significantly improves our ability to explain resource use.