Medicare Prospective Payment Systems (PPS)
A Summary
Prospective payment systems are intended to motivate providers
to deliver patient care effectively, efficiently and without over
utilization of services.The concept has its roots in the 1960s
with the birth of health maintenance organizations (HMOs). The
HMO receives a flat dollar amount (i.e., monthly premiums) and is
responsible for providing whatever services are needed by the
patient. Thus, there is a built-in incentive for providers to
create management patterns that will allow diagnosis and
treatment of the patient as efficiently as possible. In contrast,
conventional fee-for-service payment systems may create an
incentive to add unnecessary treatment sessions for which the
need can be easily justified in the medical record.
There are only a few changes to make in the HMO model to
describe the Medicare PPS systems for hospitals, skilled nursing
facilities, and home health agencies. Instead of receiving a
monthly premium to cover the whole family, the health care
facility receives a single payment for a single Medicare
beneficiary to cover a defined period of time or the entire
inpatient stay. The payment amount is based on diagnoses and
standardized functional assessments, but the payment concept is
the same as in an HMO; the recipient of the payments is
responsible for rendering whatever health care services are
needed by the patient (with some exceptions).
Except for acute care hospital settings, Medicare inpatient
PPS systems are in their infancy and will be experiencing gradual
revisions.
Some common characteristics of Medicare PPS are:
- Prepayment amounts cover defined periods (per diem, per
stay, or 60-day episodes).
- The payment amount is based on a unique assessment
classification of each patient.
- Applies only to Part A inpatients (except for HMOs and home
health agencies).
- A patient who remains an inpatient can exhaust the Part A
benefit and become a Part B case. Such cases are no longer paid
under PPS. (Part B payments for evaluation and treatment visits
are determined by the
Medicare Physician Fee Schedule.)
Medicare Hospital Outpatient PPS (OPPS) is not a
"pure" PPS methodology consistent within the
characteristics listed above because payment is made for
individual evaluation and treatment visits.
Following are summaries of Medicare Part A prospective payment
systems for six provider settings.
|
Provider Setting
|
Classification System
|
Summary Description
|
|
Inpatient acute care hospital
|
Diagnosis-Related Groups (DRGs)
|
- Primary diagnosis determines assignment to one of
535 DRGs
- The DRG payment rate is adjusted based on age, sex,
secondary diagnosis and major procedures performed. DRG
payment is per stay.
- Additional payment (outlier) made only if length of
stay far exceeds the norm
|
|
Inpatient rehabilitation hospital or distinct unit
|
Case-Mix Groups (CMGs)
|
- Patient Assessment Instrument (PAI) determines
assignment of patient to one of 95 Case-Mix Groups
(CMGs). CMG determines payment rate per stay
- Rehabilitation Impairment Categories (RICs) are
based on diagnosis; CMGs are based on RIC,
patient's motor and cognition scores and age.
Discharge assessment incorporates comorbidities
- PAI includes comprehension, expression, and
swallowing
|
|
Skilled Nursing Facility
|
Resource Utilization Groups, Third Version
(RUG-III)
|
- Fifty-eight groups
- Each beneficiary assigned a per diem payment based
on Minimum Data Set (MDS) comprehensive assessment
- A specified minimum number of minutes per week is
established for each rehabilitation RUG based on MDS
score and rehabilitation team estimates
|
|
Home Health Agency
|
Home Health Resource Groups (HHRGs)
|
- Eighty HHRGs
- The Outcome & Assessment Information Set
(OASIS) determines the HHRG and is completed for each
60-period
- A predetermined base payment for each 60-day
episode of care is adjusted according to patient's
HHRG
- No limit to number of 60-day episodes
- Payment is adjusted if patient's condition
significantly changes
|
|
Hospice
|
Each day of care is classified into one of four levels
of care
|
- Per diem rate for each of four levels of care:
- Routine home care
- Continuous home care
- Inpatient respite care
- General inpatient care
- Geographic wage adjustments determine the only
variation in payment rates within each level
|