4-1 Discussion: Prospective Payment Systems and Reimbursement
The healthcare system in the U.S. has been transformed based on accessibility, affordability, and safety. In this regard, Prospective Payment Systems (PPS) have been proposed to ease the burden of healthcare on the payment organization or individual over the years. According to Harrington, 2016), the U.S. Congress mandated the development of PPS in 1982 to control the cost. Compared to non-PPS, PPS is based on health outcomes. The reimbursement varies according to the services and setting, such that inpatient, outpatient, home-based care, and hospice cost differently. Unlike non-PPS, PPS provides a flat rate for inpatient care, only that it is awarded on a case-by-case basis. Additionally, the amount is fixated before the commencement of the service, which is different from non-prospective payment systems where costs are calculated before the service is provided. Furthermore, PPS enhances accountability in treatment since the burden is on health providers, not the insurance payer. Any loss would be incurred by the provider, which is an improvement from the non-PPS where the cost would be inflated after the treatment.
Classifications
The reason behind the creation of PPS was to motivate service providers and health agencies to deliver cost-effectively without over utilization of resources. Thus, the fixed reimbursements that replaced the fee-for-service system were classified separately as acute inpatient hospitals for Diagnosis-Related Group (DRG), home health agencies, hospice, inpatient rehabilitation facilities, skilled nursing facilities, and outpatient hospital. Each of these classifications has fixed payments that are determined before the service and on a case-by-case basis. For instance, the PPS in the skilled nursing facilities utilizes the Resource Utilization Groups (RUG), which has a Minimum Data Sets (MDS) to direct the reimbursement rate. PPS has impacted operations in the healthcare sector immensely. The service providers have to prioritize quality services to the patient to receive reimbursements. The change has influenced cost-effectiveness because cases of rehospitalization get reduced. At the same time, accessibility has improved since there is consistency in the cost of care.
Reference
Harrington, M. K. (2019). Health Care Finance and the Mechanics of Insurance and Reimbursement. Jones & Bartlett Learning.