Prospective payment system

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A prospective payment system (PPS) is a term used to refer to several payment methodologies for which means of determining insurance reimbursement is based on a predetermined payment regardless of the intensity of the actual service provided.

It includes a system for paying hospitals based on predetermined prices, from Medicare. Payments are typically based on codes provided on the insurance claim such as these: [1]

Medicare (United States) United States single-payer national social insurance program

Medicare is a national health insurance program in the United States, begun in 1966 under the Social Security Administration (SSA) and now administered by the Centers for Medicare and Medicaid Services (CMS). It provides health insurance for Americans aged 65 and older, younger people with some disability status as determined by the Social Security Administration, as well as people with end stage renal disease and amyotrophic lateral sclerosis.

Diagnosis-related group (DRG) is a system to classify hospital cases into one of originally 467 groups, with the last group being "Ungroupable". This system of classification was developed as a collaborative project by Robert B Fetter, PhD, of the Yale School of Management, and John D. Thompson, MPH, of the Yale School of Public Health. The system is also referred to as "the DRGs", and its intent was to identify the "products" that a hospital provides. One example of a "product" is an appendectomy. The system was developed in anticipation of convincing Congress to use it for reimbursement, to replace "cost based" reimbursement that had been used up to that point. DRGs are assigned by a "grouper" program based on ICD diagnoses, procedures, age, sex, discharge status, and the presence of complications or comorbidities. DRGs have been used in the US since 1982 to determine how much Medicare pays the hospital for each "product", since patients within each category are clinically similar and are expected to use the same level of hospital resources. DRGs may be further grouped into Major Diagnostic Categories (MDCs). DRGs are also standard practice for establishing reimbursements for other Medicare related reimbursements such as to home healthcare providers.

APCs or Ambulatory Payment Classifications are the United States government's method of paying for facility outpatient services for the Medicare program. A part of the Federal Balanced Budget Act of 1997 made the Centers for Medicare and Medicaid Services create a new Medicare "Outpatient Prospective Payment System" (OPPS) for hospital outpatient services -analogous to the Medicare prospective payment system for hospital inpatients known as Diagnosis-related group or DRGs. This OPPS, was implemented on August 1, 2000. APCs are an outpatient prospective payment system applicable only to hospitals. Physicians are reimbursed via other methodologies for payment in the United States, such as Current Procedural Terminology or CPTs.

The Current Procedural Terminology (CPT) code set is a medical code set maintained by the American Medical Association through the CPT Editorial Panel. The CPT code set describes medical, surgical, and diagnostic services and is designed to communicate uniform information about medical services and procedures among physicians, coders, patients, accreditation organizations, and payers for administrative, financial, and analytical purposes.

The PPS was established by the Centers for Medicare and Medicaid Services (CMS), as a result of the Social Security Amendments Act of 1983, specifically to address expensive hospital care. Regardless of services provided, payment was of an established fee. The idea was to encourage hospitals to lower their prices for expensive hospital care.

Centers for Medicare and Medicaid Services United States federal agency

The Centers for Medicare & Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is a federal agency within the United States Department of Health and Human Services (HHS) that administers the Medicare program and works in partnership with state governments to administer Medicaid, the Children's Health Insurance Program (CHIP), and health insurance portability standards. In addition to these programs, CMS has other responsibilities, including the administrative simplification standards from the Health Insurance Portability and Accountability Act of 1996 (HIPAA), quality standards in long-term care facilities through its survey and certification process, clinical laboratory quality standards under the Clinical Laboratory Improvement Amendments, and oversight of HealthCare.gov.

In 2000, CMS changed the reimbursement system for outpatient care at Federally Qualified Health Centers (FQHCs) to include a prospective payment system for Medicaid and Medicare. [2] Under this system, health centers receive a fixed, per-visit payment for any visit by a patient with Medicaid, regardless of the length or intensity of the visit. The per-visit rate for the Medicaid PPS is specific to the individual health center location. The rate is determined and updated by a financial accounting process conducted by State Medicaid agencies. The FQHC PPS rate for Medicare (previously called the All Inclusive Reimbursement Rate), in contrast, is fixed at the same level across different health centers. [3] [4]

Medicaid United States social health care program for families and individuals with limited resources

Medicaid in the United States is a federal and state program that helps with medical costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and personal care services. The Health Insurance Association of America describes Medicaid as "a government insurance program for persons of all ages whose income and resources are insufficient to pay for health care." Medicaid is the largest source of funding for medical and health-related services for people with low income in the United States, providing free health insurance to 74 million low-income and disabled people as of 2017. It is a means-tested program that is jointly funded by the state and federal governments and managed by the states, with each state currently having broad leeway to determine who is eligible for its implementation of the program. States are not required to participate in the program, although all have since 1982. Medicaid recipients must be U.S. citizens or qualified non-citizens, and may include low-income adults, their children, and people with certain disabilities. Poverty alone does not necessarily qualify someone for Medicaid.

Aside from FQHCs, other entities that provide outpatient services to Medicaid patients, that are also paid by a PPS methodology include:

The community health center (CHC) in the United States is the dominant model for providing integrated primary care and public health services for the low-income and uninsured, and represents one use of federal grant funding as part of the country's health care safety net. The health care safety net can be defined as a group of health centers, hospitals, and providers willing to provide services to the nation’s uninsured and underserved population, thus ensuring that comprehensive care is available to all, regardless of income or insurance status. According to the U.S. Census Bureau, 29 million people in the country were uninsured in 2015. Many more Americans lack adequate coverage or access to health care. These groups are sometimes called "underinsured." CHCs represent one method of accessing or receiving health and medical care for both underinsured and uninsured communities.

Public Health Service Act

The Public Health Service Act is a United States federal law enacted in 1944. The full act is captured under Title 42 of the United States Code, Chapter 6A.

Indian Health Service Branch of the United States Health Department regarding the health of Native Americans

The Indian Health Service (IHS) is an operating division (OPDIV) within the U.S. Department of Health and Human Services (HHS). IHS is responsible for providing direct medical and public health services to members of federally-recognized Native American Tribes and Alaska Native people. IHS is the principal federal health care provider and health advocate for Indian people, and its mission is to raise their health status to the highest possible level.

See also

The Medicare Payment Advisory Commission (MedPAC) is an independent US federal body headquartered in Washington, D.C.. MedPAC was established by the Balanced Budget Act of 1997. The Commission's 17 members bring diverse expertise in the financing and delivery of health care services. Commissioners are appointed to three-year terms by the Comptroller General of the United States and serve part-time. Its primary role is to advise the US Congress on issues affecting the administration of the Medicare program. Specifically the commission's mandate is to advise the US Congress on payments to private health plans participating in Medicare and health providers serving Medicare beneficiaries. MedPAC is also relied on by Medicare administrators and policy makers to evaluate beneficiary's access to care and the quality of care received. MedPAC's mandate is broad enough that it can also evaluate other issues affecting Medicare.

An Accountable Care Organization (ACO) is a healthcare organization that ties payments to quality metrics and the cost of care. ACOs in the United States are formed from a group of coordinated health-care practitioners. They use alternative payment models, normally, capitation. The organization is accountable to patients and third-party payers for the quality, appropriateness and efficiency of its services. According to the Centers for Medicare and Medicaid Services, an ACO is "an organization of health care practitioners that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it".

Medical classification, or medical coding, is the process of transforming descriptions of medical diagnoses and procedures into universal medical code numbers. The diagnoses and procedures are usually taken from a variety of sources within the health care record, such as the transcription of the physician's notes, laboratory results, radiologic results, and other sources.

Related Research Articles

The Emergency Medical Treatment and Active Labor Act (EMTALA) is an act of the United States Congress, passed in 1986 as part of the Consolidated Omnibus Budget Reconciliation Act (COBRA). It requires hospital Emergency Departments that accept payments from Medicare to provide an appropriate medical screening examination (MSE) to anyone seeking treatment for a medical condition, regardless of citizenship, legal status, or ability to pay. Participating hospitals may not transfer or discharge patients needing emergency treatment except with the informed consent or stabilization of the patient or when their condition requires transfer to a hospital better equipped to administer the treatment.

Mark McClellan American physician

Mark Barr McClellan is the Director of the Robert J Margolis Center for Health Policy and the Margolis Professor of Business, Medicine and Health Policy at Duke University. Formerly, he was a senior fellow and director of the Health Care Innovation and Value Initiative at the Engelberg Center for Health Care Reform at The Brookings Institution, in Washington, D.C. McClellan served as Commissioner of the United States Food and Drug Administration under President George W. Bush from 2002 through 2004, and subsequently as administrator of the Centers for Medicare and Medicaid Services from 2004 through 2006.

A Federally Qualified Health Center (FQHC) is a reimbursement designation from the Bureau of Primary Health Care and the Centers for Medicare and Medicaid Services of the United States Department of Health and Human Services. This designation is significant for several health programs funded under the Health Center Consolidation Act.

Program of All-inclusive Care for the Elderly (PACE) are programs within the United States that provide comprehensive health services for individuals age 55 and over who are sufficiently frail to be categorized as "nursing home eligible" by their state's Medicaid program. Eligibility for PACE requires that individuals be 55 years old or older, certified by the state to need nursing home-level care, reside near a PACE program, and able to live safely in the community. Services include primary and specialty medical care, nursing, social services, therapies, pharmaceuticals, day health center services, home care, health-related transportation, minor modification to the home to accommodate disabilities, and anything else the program determines is medically necessary to maximize a member's health.

The United States government provides funding to hospitals that treat indigent patients through the Disproportionate Share Hospital (DSH) programs, under which facilities are able to receive at least partial compensation.

A case mix group (CMG) is used in patient classification system to group together patients with similar characteristics. This provides a basis for describing the types of patients a hospital or other health care provider treats. Case mix groups are used as the basis for the Health Insurance Prospective Payment System (HIPPS) rate codes used by Medicare in its prospective payment systems.

Rural health clinic

A rural health clinic (RHC) is a clinic located in a rural, medically under-served area in the United States that has a separate reimbursement structure from the standard medical office under the Medicare and Medicaid programs. RHCs were established by the Rural Health Clinic Services Act of 1977, . The RHC program increases access to health care in rural areas by

  1. creating special reimbursement mechanisms that allow clinicians to practice in rural, under-served areas
  2. increasing utilization of physician assistants (PA) and nurse practitioners (NP)

A long-term acute care hospital (LTACH), also known as a Long Term Care Hospital (LTCH), is a hospital specializing in treating patients requiring extended hospitalization. Hospitals specializing in long-term care have existed for decades in the form of sanatoriums for patients with tuberculosis and other chronic diseases. The modern hospital known as an LTACHs came into existence as a result of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999. The Act defines an LTACH as “a hospital which has an average inpatient length of stay of greater than 25 days.” Traditionally, LTACHs provide care for patients receiving prolonged mechanical ventilation.

Bundled payment, also known as episode-based payment, episode payment, episode-of-care payment, case rate, evidence-based case rate, global bundled payment, global payment, package pricing, or packaged pricing, is defined as the reimbursement of health care providers "on the basis of expected costs for clinically-defined episodes of care." It has been described as "a middle ground" between fee-for-service reimbursement and capitation, given that risk is shared between payer and provider. Bundled payments have been proposed in the health care reform debate in the United States as a strategy for reducing health care costs, especially during the Obama administration (2009–2016). Commercial payers have shown interest in bundled payments in order to reduce costs. In 2012, it was estimated that approximately one-third of the United States healthcare reimbursement used bundled methodology.

The Center for Medicare and Medicaid Innovation is an organization of the United States government under the Centers for Medicare and Medicaid Services (CMS). It was created by the Patient Protection and Affordable Care Act, the 2010 U.S. health care reform legislation. "The center is to test innovative payment and delivery system models that show important promise for maintaining or improving the quality of care in Medicare, Medicaid, and the Children's Health Insurance Program (CHIP), while slowing the rate of growth in program costs". The center "is to give priority to twenty models specified in the law, including medical homes, all-payer payment reform, and arrangements that transition from fee-for-service reimbursement to global fees and salary-based payment". It is "intended to overcome antireform inertia by creating a mechanism for the diffusion of successful pilot programs" without requiring Congressional approval.

The 340B Drug Discount Program is a US federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. The intent of the program is to allow covered entities to "[s]tretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services." Maintaining services and lowering medication costs for patients is consistent with the purpose of the program, which is named for the section authorizing it in the Public Health Service Act (PHSA) It was enacted by Congress as part of a larger bill signed into law by President George H. W. Bush.

All-payer rate setting is a price setting mechanism in which all third parties pay the same price for services at a given hospital. It can be used to increase the market power of payers versus providers, such as hospital systems, in order to control costs. All-payer characteristics are found in most developed economies with multi-payer healthcare systems, including France, Germany, Japan, and the Netherlands. The U.S. state of Maryland also uses such a model.

Deemed status is a hospital accreditation for hospitals in the United States.

A safety net hospital is a type of medical center in the United States that by legal obligation or mission provides healthcare for individuals regardless of their insurance status or ability to pay. This legal mandate forces safety net hospitals (SNHs) to serve all populations. Such hospitals typically serve a proportionately higher number of uninsured, Medicaid, Medicare, Children's Health Insurance Program (CHiP), low-income, and other vulnerable individuals than their "non-safety net hospital" counterpart. Safety net hospitals are not defined by their ownership terms; they can be either publicly or privately owned. The missions of safety net hospitals are rather, to focus and emphasize their devotion to providing the best possible care for those who are barred from health care due to the various possible adverse circumstances. These circumstances mostly revolve around problems with financial payments, insurance plans, or health conditions. As per America's Health Care Safety Net: Intact But Endangered, Safety net hospitals are known for maintaining an open-door policy for their services.

A hospital readmission is an episode when a patient who had been discharged from a hospital is admitted again within a specified time interval. Readmission rates have increasingly been used as an outcome measure in health services research and as a quality benchmark for health systems. Hospital readmission rates were formally included in reimbursement decisions for the Centers for Medicare and Medicaid Services (CMS) as part of the Patient Protection and Affordable Care Act (ACA) of 2010, which penalizes health systems with higher than expected readmission rates through the Hospital Readmission Reduction Program. Since the inception of this penalty, there have been other programs that have been introduced, with the aim to decrease hospital readmission. The Community Based Care Transition Program, Independence At Home Demonstration Program, and Bundled Payments for Care Improvement Initiative are all examples of these programs. While many time frames have been used historically, the most common time frame is within 30 days of discharge, and this is what CMS uses.

References

  1. ↑ "Overview Prospective Payment Systems". Centers for Medicare & Medicaid Services.
  2. ↑ Chris Koppen (January 2001). "Understanding the Medicaid Prospective Payment System for Federally Qualified Health Centers (FQHCs)" (PDF). Retrieved 24 December 2014.
  3. ↑ National Association of Community Health Centers. "Medicaid Prospective Payment System" . Retrieved 24 December 2014.
  4. ↑ "Federally Qualified Health Centers: An Overview". Center for Healthcare Research and Transformation. 23 July 2013. Archived from the original on 22 October 2014. Retrieved 24 December 2014.
  5. ↑ "Indian Health Service Legislation" . Retrieved 24 December 2014.
  6. ↑ "Securing additional Medi-Cal payments for Clinics in California" . Retrieved 24 December 2014.
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