The application of output value analysis, a type of benefit/cost analysis, to a psychiatric patient population is reported. A method for discounting the value of the program if a patient was readmitted within a year after discharge was introduced. The application of this discount factor reduces the value produced by the program and thereby reduces both productivity and effectiveness indices. When applied to groups known to differ in readmission rates, such as first admissions and readmissions or voluntary and involuntary admissions, the discount factor can accentuate group differences markedly. When selected diagnostic groups were compared, the discount factor could even reverse the relative standing of the groups.
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