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Managed health care systems often use treatment readmission data as an indicator of psychiatric patient outcome and program performance. This study of 3,018 inpatients being treated for substance abuse in Department of Veterans Affairs medical centers found that across a range of measures and patient subpopulations, patient outcomes and program performance were virtually independent of treatment readmission. These findings suggest that even though readmission for substance abuse treatment may have value as an easily obtainable measure of health care utilization and cost, it cannot serve as a valid substitute for direct assessment of patient outcome or program performance.