This paper provides preliminary analysis of claims data of Mediclaim insurance scheme to understand the relationship between disease pattern and the quality of health care. We use length of stay (LOS) and average length of stay (ALS) as one of the indicators of quality of care. We use the Diagnostic Related Grouping (DRG) based ALS as the benchmark to make this evaluation and comparison. It is observed that the reimbursements in insurance system are tied to hospital inputs and resource use and not to diagnostic related groups or outputs. Therefore the current system of reimbursements and provider payment system influences the length of stay and there is significant variation in ALS observed across disease groups and its sub-groups. There is no consistency observed in ALS as the severity of diseases under each group increases. This reflects lack of standards/protocols and unintended consequences of current practice of provider payment system. Implementing systems like Diagnosis Related Grouping would be an attempt to link it with outcomes. The paper provides insights into whether there is a significant mismatch in the premium that insurance companies charge in comparison to the risk insurer undertake while issuing policies. It was also found that after adjusting for the purchasing power parity, the claims data suggest that healthcare costs reimbursed for medical insurance to private providers in India are actually higher than healthcare costs reimbursed to providers of healthcare in the US under DRG system. The paper argues that under less regulated private healthcare providers market and health insurance market, cost based reimbursement is highly undesirable. The regulators should put in place a system of pre-determined rates for reimbursements in health insurance.