Objective To explore the practical effects of a head nurse performance reform under the Diagnosis-Intervention Packet （DIP） payment system on nursing quality, operational efficiency, and management satisfaction, providing insights for public hospitals to adapt to DIP reforms and optimize nursing management systems.Methods We took 53 nursing units in a tertiary Grade A hospital as the research site.The reform involved DIP-oriented vertical management which was rolled out through restructuring head nurse performance allocation system by incorporating core indicators such as Case Mix Index （CMI）, nursing quality, and cost control.Comparative analyses were performed on head nurse performance distribution, nursing quality scores, departmental operational efficiency, and satisfaction levels of head nurses and department chiefs between 2023 （pre-reform） and 2024 （post-reform）.Results Compared to the pre-reform period, there were significant improvements in head nurses′ performance, nursing qua-lity, and satisfaction levels of both head nurses and department chiefs, while daily nursing consumables per bed, average length of hospital stay, and average hospitalization cost per admission were significantly reduced (all P＜0.05).Conclusion The DIP-based head nurse performance reform, which is rolled out through optimizing incentive structures, strengthening quality-driven practices, and enhancing interdisciplinary collaboration, significantly improvs nursing quality, operational efficiency, and managerial satisfaction.It provides a practical pathway for public hospitals to achieve refined cost management and sustainable development.