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Medicare prospective reimbursement for mental health services: A literature review

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Abstract

Since the implementation of Medicare's prospective payment system (PPS) through Diagnostic-Related Groups (DRGs) in 1983, there have been a number of studies attempting to evaluate the appropriateness of this system for psychiatric care. Even though the DRG system would be administratively manageable for psychiatric patients, numerous other shortcomings make the system untenable for mental health care. The DRGs are not homogeneous and do not accurately predict length of stay or resource utilization as well as do the surgical DRGs. Financial risk would result for private psychiatric hospitals, general hospitals with psychiatric units, and child and adolescent treatment units. There would be dramatic fiscal responses by hospitals which would negatively affect the quality of care including restricting admissions for the more difficult and costly chronic patients, undertreatment with inadequate lengths of stay, and transferring of patients to overburdened state and county mental hospitals. There is a recognized need for a prospective system but other alternatives would seem to be more viable than the currently proposed DRG system.

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Authors
  1. William R. Holcomb Ph.D.
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  2. Warren A. Thompson Ph.D.
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Additional information

William R. Holcomb, Ph.D., is Coordinator of Treatment Services at Mid-Missouri Mental Health Center, and Warren A. Thompson, Ph.D., is at the Department of Health Services Management at the University of Missouri-Columbia.

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Holcomb, W.R., Thompson, W.A. Medicare prospective reimbursement for mental health services: A literature review. Administration in Mental Health 15, 127–138 (1988). https://doi.org/10.1007/BF00869247

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