The effect of hospital payment methods on the pattern and cost of mental health care

The authors report on a study of the impact of a prospective payment method on hospital charges and mix of services provided to a group of Medicare patients treated for mental disorders in general acute care hospitals in Maryland. The study focused on per case reimbursement, under which hospitals are guaranteed a level of total revenue based on the number and case mix of discharges, and examined its effect on hospital charges during an index admission and on hospital and nonhospital charges over a three-month period following the index admission. The results suggest that per case reimbursement provides incentives to reduce the cost of one hospital stay, but this cost reduction is possibly offset by a higher readmission rate or by higher readmission charges. The authors conclude that the impact of the per case payment method on the total cost of mental health care over a specific period of time is insignificant, but that the payment method may influence the pattern of care.