This study was undertaken to determine if a measure of severity of illness for psychiatric patients, the Psychiatric Severity of Illness Index, could produce psychiatric case mix groups that are more homogeneous with respect to resource use than the diagnosis-related groups (DRGs). Psychiatric Severity of Illness data were collected on 1,672 cases in ten hospitals of various types. Of these cases, 1,418 had enough information in the medical record to be scored using the Psychiatric Severity Index, 1,173 of which were in MDC 19 (mental diseases and disorders). We found that four Psychiatric Severity of Illness groups explained between 34% and 50% of the variation in length of stay of the combined hospital data in MDC 19, whereas nine DRGs explained between 6% and 14%. DRGs subdivided by Psychiatric Severity of Illness groups explained between 40% and 54% of the variation in length of stay. The implications of these results for cross-hospital comparisons are discussed.