The basis of Medicare's prospective payment for alcohol, drug abuse, and
mental illness hospital admissions has been the patient classification
system known as diagnosis-related groups (DRGs). This paper describes two
alternative patient classification systems, disease staging and clinically
related groups, and reports how well each system predicts resource use
compared to the DRG system. Medicare data from four states were used to
test the comparative strength of these patient classification systems.
Although disease staging and clinically related groups performed better
than DRGs, they were still poor predictors of resource use.