Objective: Taking inpatients with colorectal cancer as an example, the paper explores a suitable medical insurance payment method for traditional Chinese medicine (TCM) medical institutions. Methods: 28083 cases of colorectal malignant tumors were selected from the medical records of inpatients from some TCM and comprehensive hospitals in Beijing in 2021. Non-parametric testing and multiple linear regression analysis were used to determine the influencing factors of hospitalization costs, and decision tree model was used to construct the grouping plan. Results: 8 influencing factors, including surgery, number of diagnoses and the proportion of TCM treatment costs, were included as classification nodes in the decision tree model to form 12 case groups. The CV and RIV values showed good grouping results. Conclusion: By incorporating the indicator "proportion of TCM treatment costs" representing the characteristics of TCM as a classification node into the grouping model, a treatment grouping plan for colorectal cancer that reflects the characteristics of TCM can be obtained, which can provide a reference for establishing medical insurance payment methods suitable for TCM medical institutions.