The impact of prospectively set hospital budgets on psychiatric admissions

This article examines the impact of prospectively set hospital budgets on rates of admission of psychiatric patients in New York state, U.S.A. The analysis takes advantage of a natural experiment which took place in the early 1980s, whereby a geographic region adopted a prospective hospital budget reimbursement scheme that differed from the prospective per diem reimbursement scheme used in the rest of the state. The results indicate a strong decrease in psychiatric admissions attributable to the experimental payment method.