Objective: This paper analyzes the current situation and methods of combining hospital performance evaluation system with DRG payment method reform in Zhejiang Province. Methods: Through research and interviews with 38 hospitals in Zhejiang Province, we learned whether and what DRG-related indicators were used in hospital performance evaluation. Results: 53% of the surveyed hospitals included DRG-related indicators into the department individual award evaluation part of the performance evaluation system, including the over-expenditure amount of hospital medical insurance fund, CMI value, etc. Conclusion: At present, the hospital performance evaluation system focuses more on DRG cost management than evaluation of medical service capacity and medical efficiency. In the future, DRG-related indicators can be used for multi-dimensional evaluation, and hospitals can adapt to the reform of DRG payment with process management.