Medicare's system of DRG-based prospective payment (PPS) is one of the most important recent health policy initiatives designed to contain escalating health care costs. We propose to examine the effects of PPS and of TEFRA-based payment, relative to Medicare's former fee-for-service reimbursement, on casemix, length of stay, and quality and outcomes of care for elderly patients hospitalized for depression in acute care general medical hospitals. We propose to use NIMH funds to conduct all analyses of the depression data from a HCFA-funded study of quality of care. While the HCFA study was designed to study medical/surgical conditions, data collection for depressed patients was included to allow analyses to be conducted under separate funding. The study compares hospital care prior to and after PPS implementation. The study has a nationally representative sample of acute care general medical hospitals and a representative sample of patients with a primary discharge diagnosis of depression from each hospital. Clinically-detailed data on casemix, processes of care, and discharge status were obtained from 2840 medical records of depressed patients. Data on post-discharge readmission and mortality rates were obtained from secondary sources. We propose to derive all study variables, develop state-of-the-art measures of casemix and quality and outcomes of care, and validate these measures against expert psychiatrist's judgements. We will estimate multiple regression models to determine the effects of PPS on each group of outcome variables (casemix, length of stay, and quality and outcomes of care), while controlling for patient, hospital, and geographic characteristics. In particular, we will control for admission casemix; we will control for effects of passage of time between pre- and post- periods through forward extrapolation. We will estimate and control for selection effects due to choice of admission under DRG-based PPS versus TEFRA. In addition, we will estimate effects of the other explanatory variables on casemix, length of stay, and quality and outcomes of care. This study will provide the first national estimates of the distribution of quality of care for a psychiatric condition.