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Prospective payment for psychiatric services.

M Dada1, W D White, H H Stokes

  • 1Purdue University.

Journal of Health Politics, Policy and Law
|January 1, 1992
PubMed
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The Medicare prospective payment system (PPS) poses financial risks for psychiatric hospitals. Alternative payment options can reduce this risk while maintaining cost-containment incentives.

Area of Science:

  • Health Economics
  • Healthcare Policy
  • Psychiatric Care Management

Background:

  • The Medicare prospective payment system (PPS) incentivizes cost containment but introduces financial risk for providers.
  • Psychiatric services are exempt from PPS due to concerns about risk mitigation effectiveness.
  • Integrating psychiatric facilities into PPS requires evaluating financial risk under various payment models.

Purpose of the Study:

  • To evaluate the short-run and long-run financial risk of integrating psychiatric facilities into the Medicare prospective payment system (PPS).
  • To compare the risk exposure of psychiatric specialty hospitals and psychiatric units under alternative PPS payment options.

Main Methods:

  • Simulation analysis using Medicare discharge data from 1985.

Related Experiment Videos

  • Modeling of alternative PPS payment options for psychiatric services.
  • Assumption of fixed treatment patterns to isolate payment impacts.

    • Main Results:

    • Under current PPS rules, psychiatric specialty hospitals face high financial risk.
    • Alternative payment options demonstrate potential to significantly reduce financial risk for these facilities.
    • Proposed options maintain incentives for cost containment within psychiatric care.

    Conclusions:

    • Current Medicare prospective payment system (PPS) rules present substantial financial risk for psychiatric hospitals.
    • Viable alternative payment strategies exist to mitigate this risk.
    • Policy adjustments can balance financial risk reduction with cost-efficiency goals in psychiatric care.