Provider response to Medicare's PPS: reductions in length of stay for psychiatric patients treated in scatter beds.

We used Medicare discharge data for the years 1984 and 1985 to analyze reductions in lengths of stay for psychiatric patients treated in general hospitals that did not have specialized psychiatric units. In response to Medicare's Prospective Payment System (PPS), not-for-profit hospitals experienced declines in lengths of stay averaging between 10% and 20% two years after they went onto PPS, while for-profit hospitals experienced a somewhat greater decline. Lengths of stay fell most rapidly during the months immediately surrounding the date on which a hospital began to be paid under PPS. This response included an anticipatory effect--hospital lengths of stay began shortening just before PPS payments started.