Bringing psychiatric patients into the Medicare prospective payment system: alternatives to DRGs

The basis of Medicare's prospective payment for alcohol, drug abuse, and mental illness hospital admissions has been the patient classification system known as diagnosis-related groups (DRGs). This paper describes two alternative patient classification systems, disease staging and clinically related groups, and reports how well each system predicts resource use compared to the DRG system. Medicare data from four states were used to test the comparative strength of these patient classification systems. Although disease staging and clinically related groups performed better than DRGs, they were still poor predictors of resource use.