Prospective payment and psychiatric discharges from general hospitals with and without psychiatric units.

For psychiatric patients treated in general hospitals, the prospective payment system does not differentiate between patients treated in medical-surgical wards and patients treated in psychiatric units. In particular, the system uses a single length-of-stay norm for both kinds of patients, even though psychiatric patients in medical-surgical units have shorter stays. The authors document major differences in length of stay and hospital charges for both groups of patients in relation to selected patient and hospital characteristics. They conclude that the current reimbursement procedures systematically overpay for stays in nonpsychiatric units and underpay for stays in psychiatric units, and they suggest mechanisms for partly reducing such inequities.

Prospective payment for psychiatric hospitalization: context and background.

Retrospective cost-based reimbursement, incorporated into Medicare from the outset, has been the dominant mode of financing for health and mental hospital services. However, steadily rising health care costs led to the 1983 enactment of a prospective payment system for hospital reimbursement for Medicare, based on diagnosis-related groups. Many psychiatric hospitals and units are currently exempted from the system, but psychiatry and the health care field in general must deal with a number of issues, such as cost-shifting, quality of care, and adequate recognition of severity of illness, resulting from implementation of the system. The authors provide background for the prospective payment system by defining terms, summarizing the history of federal prospective payment legislation, describing three state systems, and discussing generic issues facing the health care community.