Prospective Payment for Psychiatric Hospitalization: Questions and Issues

Can prospective payment control the cost of Medicare treatment without seriously affecting the quality of care? The authors pose this question and then explore the new system's implications for the mental health field. Because psychiatric diagnoses do not adequately describe the reasons for hospitalization, and because treatment of mental disorders is not standardized throughout the country, the authors posit that psychiatric hospitals will have difficulty adjusting to a reimbursement system based on diagnosis alone. They also review four major aspects of the prospective payment system: efficiency, equity and access for patients, quality of care, and practicality. Other issues, such as prospective payment's financial impact on medical research and technology development, are also discussed.