Abstract
The introduction of diagnosis related groups (DRGs) as a basis for funding in the United States has revealed several shortcomings in current DRG systems. Overall, DRGs have proven to be poor predictors of cost, accounting for approximately one third of the variation in cost and length of stay for surgical DRGs and falling to less than 10% for medical DRGs. Their ability to contain costs also remains uncertain, with savings associated with reductions in length of stay being offset by increased readmission rates. Given the increasing commitment of government to casemix approaches to funding it is suggested that psychiatry should participate in the process of solving the problems so far identified with DRG systems. Participation would, it is hoped, create a focussed debate about the provision of a “gold standard” of care for all patients. The evaluation and refinement of existing DRGs is urgently needed and could utilise a number of comprehensive data bases which already exist across the country. Alternatives to diagnosis such as functional status and treatment needs should also be explored.