An analysis of DRG-based reimbursement for psychiatric admissions to general hospitals

The authors analyzed the potential financial impact of paying general hospitals on the basis of diagnosis-related groups (DRGs) for Medicare alcohol-drug abuse and psychiatric admissions. Average costs per admission were substantially higher for general hospitals with special psychiatric units that are currently exempt from the prospective payment system (PPS) than for hospitals without exempt units. Simulations of DRG-related payments indicated that these payments would be greater for admissions to hospitals with exempt psychiatric units than for admissions to hospitals without exempt units. However, the differences in costs between these two types of facilities were greater than the differences in payments that would occur under a PPS.