Aspects to Consider When Taking Advantage of Medicare’s Prospective Payment System (PPS)

In a time when healthcare costs are rising at an alarming rate, prospective payment systems (PPS) are one of the most important policy tools. Using a methodology that shapes providers’ incentives, PPS has gained traction in health policy-making in relation to the government’s effort to expand health coverage.

How does PPS Work?

Patient care is delivered efficiently, effectively, and without overutilizing services through the Prospective Payment System. Patients are to be responsible for requesting the services they need from healthcare facilities. As a result, providers have an incentive to develop management patterns that allow diagnosis and treatment to take place as efficiently as possible.

Medicare defines PPS as a method of reimbursement whereby Medicare payments are made based on a predetermined, fixed amount instead of a fee-for-service payment system that adds unnecessary treatment sessions. Based on the classification system of a particular service, the payment amount for that service is determined by the PPS method. The diagnosis-related groups for hospital inpatients are a good example.

CMS uses separate PPSs to reimburse home health agencies, acute inpatient hospitals, hospital outpatients, rehabilitation facilities, psychiatric facilities, long-term care hospitals, and skilled nursing facilities. On the CMS website, you can find details about PPS.

Prospective Payments: What are the Main Advantages?

In addition to the availability of code-based reimbursement, the PPS method has a number of other advantages. To feed network development, medical management, and contracting, it helps create incentives for more accurate coding and billing.

Unlike Medicare’s previous per diem system, PPS allows Medicare to pay one amount for each hospital admission, regardless of how many tests and procedures were performed.

The Medicare PPS has The Following Advantages:

• There are three types of payments: per diem, per stay, and 60-day episodes.
• Each patient’s assessment classification determines the payment amount
• Inpatient facilities are subject to PPS
• Prevents the use of unnecessary and expensive drugs and diagnostic procedures

In general, PPS applies to all hospitals participating in Medicare, with certain exclusions, exemptions, and adjustments. Visit the CMS website for details. Unlike fee-for-service plans that reward providers based on their volume of care provided and can create incentives for unnecessary treatment, PPS payments are based on multiple factors, including location and diagnosis. Among the PPSs used by CMS for inpatient hospital services are those related to diagnosis-related groups (DRGs), hospice, and inpatient psychiatric facilities (IPFs).

What is The Process for Adjusting PPS Payments?

Area wage adjustments, disproportionate share adjustments, DRG weights, outliers in cost, geographic variations in wages, etc., are used to adjust PPS payments. In order to improve productivity, focus on value instead of volume, and provide incentives for quality care, PPS is committed to value-based care standards that healthcare providers are striving to optimize through the use of technology. Through the prospective payment system, CMSPricer, a SaaS-based Medicare and Medicaid Self Service Solution for repricing, has been immensely useful to its users in achieving their goals.