THE IMPACT OF DRG-BASED BUDGETING ON INPATIENT PSYCHIATRIC-CARE IN VETERANS-ADMINISTRATION MEDICAL-CENTERS

In 1985 the Veterans Administration (VA) implemented a prospective budgeting system for acute inpatient care based on diagnosis-related groups (DRGs). To assess the impact of this system on psychiatric care, this study reviewed data on all VA discharges for psychiatric or substance abuse dis-orders that occurred during the four years before and the four years after this system was implemented. During the four years following the implementation of DRG-based budgeting the number of annual discharges increased by 28.7% and the number of unique patients discharged increased by 15.5%. Average lengths of stay declined by 36.9% and total annual bed days of care per unique patient declined by 29.7%. These changes occurred in association with an 11.5% reduction in the total number of beds occupied by psychiatric patients, an 8.9% reduction in direct per diem expenditures for psychiatric care nationally, and a 32.7% decline in direct expenditures per episode, after adjustment is made for inflation. In spite of a continuing decline in the value of the available re-sources, largely due to the effect of inflation, prospective budgeting appears to have had a major impact on the pattern of inpatient psychiatric care in this large health care system. © Lippincott-Raven Publishers.