Psychiatric DRGs: more risk for hospitals?

: The diagnosis related group (DRG) system, which replaced the cost-plus system of reimbursement, was implemented in 1983 by Medicare to cover medical expenses on a prospective basis. To date, the DRG system has not been applied to psychiatric illness. The authors compare the likelihood of cost overruns in psychiatric illness with that of cost overruns in medical illness. The data analysis demonstrates that a prospective payment system would have a high likelihood of failure in psychiatric illness. Possible reasons for failure include wide variations in treatments, diagnostics, and other related costs. Also, the number of DRG classifications for psychiatric illness is inadequate.