OBJECTIVE: This study examined predictors of hospital readmission to determine whether readmissions can serve as a quality indicator for an inpatient psychiatric service. METHOD: A series of 255 patients consecutively admitted to any of seven psychiatric hospitals in a regional managed care program were followed to determine whether they were readmitted within 6 months of discharge. Case managers assessed patients with the use of a reliable outcome management/decision support system designed for acute psychiatric services. RESULTS: Patients with greater impairment in self-care, more severe symptoms, and more persistent illnesses were more likely to be readmitted than other patients. Suicidal patients were less likely to be readmitted. There was no evidence to suggest that poor hospital outcome or premature discharge was associated with readmission either within 30 days or within 6 months. CONCLUSIONS: Although patients at risk for hospital admission can be identified, it does not appear that the success of the hospital intervention per se influences the likelihood of readmission. Use of readmission rates as quality indicators for hospital care providers is not recommended.