The present study was conducted to examine the degree of variation in length-of-stay (LOS) among health care institutions participating in 17 diagnosis-related groups (DRGs) payment system and to find out hospital characteristics affecting the variation. Electronic medical claims data for treatments of severity classification “0” of 17 DRGs provided for two years(2003∼2004) were collected. For each DRG, the degree of variation in average LOS among health care institutions were analyzed using the random effect model. For DRGs showing significant differences in LOS, multiple regression analyses were performed to find out factors associated with LOS. Significant variations in LOS were observed for 9 DRGs including unilateral/bilateral lens procedures, adult/child tonsilectomy, other anal procedures, bilateral adult/child herniorraphy, unilateral child herniorraphy, and hysterectomy using laparoscopic procedure. Among the 9 DRGs, five DRGs were selected to investigate the factors explaining for the variation. It was observed that the location of institution was significant predictors for all five DRGs. Within the same DRGs, LOS was significantly shorter among the institutions located in Seoul than those in other areas. As compared to clinics, hospitals and general hospitals/tertiary care institutions showed significantly longer LOS for DRGs of lens procedures, tonsilectomy, and other anal procedures. It is recommended that the institutions located in other than Seoul area benchmark the strategies of the institution in Seoul in efficiently managing LOS. Also, significant variation within the same severity classification such as other anal procedures implies the imminent need for improvement of patient classification system.