Abstract The indicator ‘death in low-mortality diagnosis-related groups (DRG)’ is a patient safety indicator (PSI) that can be derived from routinely collected administrative data sources. It is included in a group of PSI that have been proposed to compare and monitor standards of hospital care in Australia. To summarize the attributes of this indicator as a measure of quality and safety in healthcare and examine issues regarding the development process, definitions and use of the indicator in practice. A structured literature search was conducted using the Ovid Medline database to identify peer-reviewed published literature which used ‘death in low-mortality DRG’ as a quality/safety indicator. Key quality websites were also searched. The studies were critically appraised using a standardized method. A total of 12 articles was identified which met our search criteria. Most were of low methodological quality because of their retrospective study designs. Only three studies provided evidence that the quality of care gap is higher in ‘deaths in low-mortality DRG’ than in other cases. Most of the studies reviewed show that there are several limitations of the indicator for assessing patient safety and quality of care. The few studies that have assessed associations with other measures of hospital quality have shown only weak and inconsistent associations. Higher quality, prospective, analytic studies are required before ‘death in low-mortality DRG’ is used as an indicator of quality and safety in healthcare. Based on current evidence, the most appropriate use is as a screening tool for institutions to quickly and easily identify a manageable number of medical records to investigate in more detail.