Our study, conducted on a geropsychiatric hospital unit, showed that the average length of hospital stay decreased after the introduction of DRGs, while the number of patients discharged to more restrictive facilities showed a marginal in crease.Whether these phenomena are causally related to the introduction of DRGs cannot be inferred. A descriptive, exploratory study can only show associative relationships between variables. Additional longer term observations, multicenter studies, and studies under experimental conditions (random assignment to control groups) are needed to help shed light on the impact of prospective payment on psychiatric hospital care. Too much discussion of DRGs and psychiatry has been based on intuitive speculation. Reliable data are required to enrich the discussion, focus on problematic areas, and stimulate constructive suggestions for improvement.