To date, formal studies on rehospitalization have used clinical diagnoses to predict and avoid costly readmission (Gooding & Jette, 1985). However, other studies have found that rehospitalization could be avoided in nearly half of patients if appropriate discharge planning and services are provided (Graham & Livesley, 1983). Nevertheless, most studies of readmissions ignore environmental and psychosocial influences. Placement planning and readmission have special importance under prevailing Medicare pressures to shorten hospitalizations. In 1983, Medicare cost-containment efforts led to the use of the prospective payment system and diagnosis related group (DRG) classifications. Lohr and Schroeder (1990), as well as Russell and Manning (1989), speculated that elderly people would be discharged too soon and in poorer health, thus leading to spiralling hospital costs as a result of readmissions. According to the U.S. Congress, Senate Special Committee on Aging (1989), older adults are often discharged from acute-care hospitals early because of the DRG system, thus leading to readmissions. Readmissions already account for 24 percent of Medicare expenditures among hospitalized patients (Anderson & Steinberg, 1984). Because Medicare funds most older adults' hospital care, the impact of DRGs on the discharge planning process is an important issue for medical social work (Abramson, 1988; Coulton, Dunkle, Goode, & MacKintosh, 1982; Dunkle, Coulton, MacKintosh, & Goode, 1982; Morrow-Howell, Proctor, & Mui, 1991). This study explores how rehospitalization is influenced by the older person's health and social status prior to hospitalization, the patient's perception of family environment, family and professional involvement while the patient is hospitalized, the elderly person's involvement in the decision-making process in the hospital, and the type of discharge placement made. Implications of the findings and their relationship to the social worker and the discharge planning process will be discussed. CONCEPTUAL FRAMEWORK This study is based on the model for explaining rehospitalization contained in Figure 1. The authors assumed that rehospitalization is most likely for individuals with fewer personal resources, including personal competence as measured by a scale of ability to perform activities of daily living (ADLs), the presence of a spouse, and the economic resources that accompany higher socioeconomic status (SES). However, if such factors are adjusted for in discharge placement decisions (as they should be and sometimes are), we assumed that their effect would be moderated. Conversely, poor placement decisions can exacerbate the problem. Thus, Figure 1 shows a direct relationship of ADL, SES, and marital status to rehospitalization. The relationship of rehospitalization to discharge placement is in turn assumed to be influenced by ADL, SES, and marital status. The other factor that has a direct influence on rehospitalization is the degree of the patient's involvement in the discharge placement process. Patient involvement is also assumed to have an indirect effect on rehospitalization through its impact on the placement decision. The quality of patient involvement is in turn affected by the patient's overall mental and physical capacity; the interactions of patient, family, and professional staff; and the patient's state of mind, which includes levels of depression and sense of (or locus of) control. Evidence for the impact of SES, ADL, marital status, and depression on rehospitalization is straightforward. For example, elderly people's reduced capacity to perform ADLs--to walk, bathe, dress, groom, feed, transfer, and toilet themselves (Katz, Downs, Cash, & Grotz, 1970)--increases their chances of being rehospitalized (Victor & Vetter, 1985). People living alone are also more likely to be at lower socioeconomic levels than those living with someone else (Kasper, 1988); they are also more likely to be in poorer health and less able to perform ADLs without assistance, making them more prone to institutionalization (Kasper, 1988). …