challenges in bringing exempt psychiatric services under a prospective payment system by december 31 1985 the secretary of the department of health and human services must report to congress on whether psychiatric programs now exempt from medicares prospective payment system can be brought under that system and if so how the underlying issue is determining how funds for psychiatric treatment should be divided up between psychiatric facilities after discussing the advantages of incorporating psychiatric services into the prospective payment system the authors review the criteria and methods for evaluating a psychiatric prospective payment system and suggest ways that the current classification and payment systems can be improved steps to ease the transition to prospective payment are reviewed as are issues requiring further research