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DRGs: an overview of the issues.

J T English, R G McCarrick

General Hospital Psychiatry

|September 1, 1986

Summary

Medicare's prospective payment system for psychiatric care has significant flaws. Addressing issues like premature discharge and equitable access is crucial for improved mental health financing.

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Area of Science:

Health economics
Psychiatric care financing
Healthcare policy

Background:

Medicare implemented a prospective payment system (PPS) based on Diagnostic Related Groups (DRGs) in 1983.
This system has demonstrated deficiencies specifically concerning psychiatric care.
Psychiatric units in general hospitals received a temporary exemption due to advocacy by the American Psychiatric Association.

Purpose of the Study:

To review the potential effects of a DRG-based payment system on psychiatric clinical practice.
To discuss the shortcomings of the DRG system in accurately predicting service utilization for psychiatric care.
To identify and suggest areas for future research in psychiatric care financing.

Main Methods:

Review of existing literature and policy analysis regarding DRG-based prospective payment systems.
Examination of problematic issues within current psychiatric care financing models.
Discussion of clinical practice implications and service utilization prediction challenges.

Main Results:

The DRG system presents several problematic issues for psychiatric care, including premature discharge, code manipulation, cost-shifting, and challenges in ensuring equitable patient access to services.
The current DRG framework is inadequate for accurately predicting the utilization of psychiatric services.
The impact of DRG-based payment on clinical practice requires careful consideration and review.

Conclusions:

The prospective payment system based on Diagnostic Related Groups has inherent deficiencies for psychiatric care.
Modifications or alternative financing systems for psychiatric care must address critical issues such as premature discharge, code manipulation, cost-shifting, and equitable patient access.
Further research is necessary to develop effective and equitable financing models for psychiatric services.

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