Under the background of deepening medical insurance payment method reform，diagnosis relatedgroups(DRG)are the key policy of medical insurance reform. In promoting its implementation，how to reflectthe dual orientation of cost control and quality improvement and interpret and respond to it in public hospitalshave become the“required question”in the new medical field. This paper organically combines the Multiple-Streams theory with the Yardstick competition theory to build a theoretical analysis framework， whichqualitatively deduces the theoretical rationality and necessity of the dual orientation of cost control and qualityimprovement of DRG while concluding that there are still contradictions at the present stage. Through thedetailed correspondence of DRG reform from the perspectives of medical insurance and medical management，this paper analyzes and refines the causes of contradictions and then proposes corresponding countermeasures tosupport further improvement and implementation of DRG policy.