A study conducted jointly by RAND and the University of California, Los Angeles, examined the question of how the PPS reform affected the quality of hospital care for Medicare patients. It found that, overall, PPS had no negative effect on patient outcomes and did not alter an already existing trend toward improved processes of care.
Does PPS affect the quality of care for Medicare patients?
However, because it contained incentives for hospitals to shorten stays and to choose the least expensive methods of care, PPS raised concerns about possible declines in the quality of care for hospitalized Medicare patients.
What is the Medicare PPS payment system?
Medicare's prospective payment system (PPS) for hospital inpatient care was implemented in October, 1983. Under this system, payment for care is made on a fixed price per case, based on the average cost for a patient in a given Diagnosis Related Group (DRG).
What is the impact of PPS on hospital admissions?
When PPS was enacted, it was anticipated that the new system, in paying on a per case rather than on the previous per diem basis, would provide an incentive for hospitals to increase the volume of admissions.
When did Medicare change from fee for service to PPS?
Faced with sharply escalating Medicare costs in the early 1980s, the federal government completely revised the way Medicare pays hospitals for treating elderly patients. The governing agency, the Health Care Financing Administration, switched from a retrospective fee-for-service system to a prospective payment system (PPS).
What was the effect of the prospective payment system on hospital patient care?
Under this system, hospitals were paid whatever they spent; there was little incentive to control costs, because higher costs brought about higher levels of reimbursement. Partly as a result of this system of incentives, hospital costs increased at a rate much higher than the overall rate of inflation.
How do the prospective payment systems impact operations?
Under PPS, a hospital may experience an increase or decrease in its overall operating ratio, depending on whether it incurs a Medicare gain or loss. The incentive to economize on inpatient care and substitute post-hospital services was reasoned to be negatively related to this financial impact.
Why is the PPS rate important?
The enables healthcare providers to be aware of the predetermined reimbursement amount for patient care regardless of the amount of care provided. PPS is intended to motivate healthcare providers to structure cost-effective, efficient patient care that avoids unnecessary services.
What is meant by the prospective payment system and what part of Medicare does it affect?
A Prospective Payment System (PPS) is a method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount. The payment amount for a particular service is derived based on the classification system of that service (for example, diagnosis-related groups for inpatient hospital services).
What are the main disadvantages of a prospective payment system?
Prospective payment plans also come with drawbacks. Because providers only receive fixed rates, some might seek to employ cost-cutting measures to maximize profits while not necessarily keeping their patients' best interests in mind.
Is prospective payment system good or bad?
Key Findings Medicare's prospective payment system (PPS) did not lead to significant declines in the quality of hospital care. Mortality rates declined for all patient groups examined, and other outcome measures also showed improvement.
Why did Medicare implement the prospective payment system?
The central objectives of PPS were to reduce rates of increase in Medicare inpatient payments and in overall hospital cost inflation.
What are the implications for the delivery of healthcare when providers are reimbursed on a prospective payment system?
What are the implications for the delivery of health care when providers are reimbursed based on a fee-for-service system? There are few incentives to save money or be efficient; more services mean more income.
What is Medicare outpatient prospective payment system?
The Outpatient Prospective Payment System (OPPS) is the system through which Medicare decides how much money a hospital or community mental health center will get for outpatient care provided to patients with Medicare. The rate of reimbursement varies with the location of the hospital or clinic.
Which PPS provides a predetermined payment that depends on the patient's principal diagnosis?
28 Cards in this SetAn 'episode of care' in the home health prospective payment system (HHPPS) is ..... days60Which PPS provides a predetermined payment that depends on the patient's principal diagnosis, comorbidities, complications, and principal and secondary procedures?IPPS26 more rows
What changes did Medicare DRGs cause in hospital behavior?
What changes did Medicare DRGs cause in hospital behavior? They became concerned with reducing lengths of stay for aged patients and became concerned with physicians practice behaviors.
Why was the prospective payment system established?
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).
February 1988
This report was prepared under contract #18-C-98641 between the U.S. Department of Health and Human Services (HHS), Office of Social Services Policy (now known as the Office of Disability, Aging and Long-Term Care Policy) and the Urban Institute. Funds were also provided by the Health Care Financing Administration.
Purpose
Several studies have examined PPS effects on the total Medicare population. The purpose of this study was to examine the effects of PPS on the subgroup of Medicare beneficiaries who were functionally disabled.
Findings
Hospital LOS. The study found that expected reductions in lengths of hospital stays occurred under PPS, although this reduction was not uniform for all admissions and appeared to be concentrated in subgroups of the disabled population.
Limitations and Conclusions
This study on the effects of hospital PPS on Medicare beneficiaries has certain limitations. The available data precluded analyses of other service episodes such as traditional nursing home stays. At the time the study was conducted, data were not available to measure use of Medicare Part B services.
What is PPS in healthcare?
The governing agency, the Health Care Financing Administration, switched from a retrospective fee-for-service system to a prospective payment system (PPS). Under PPS, hospitals receive a fixed amount for treating patients diagnosed with a given illness, regardless of the length of stay or type of care received.
How effective is PPS?
PPS proved effective at curbing cost growth. However, because it contained incentives for hospitals to shorten stays and to choose the least expensive methods of care, PPS raised concerns about possible declines in the quality of care for hospitalized Medicare patients. A study conducted jointly by RAND and the University of California, ...
What are the recommendations of the PPS study?
First, to eliminate possible problems with patients discharged in unstable condition, a more systematic assessment should be made of patients’ readiness to leave the hospital and receive care in another setting. Second, to provide current information about the effects of Medicare’s payment methods on quality of care, clinically detailed data should be collected to monitor sickness at admission, processes of care, discharge status, and outcomes on a regular basis as long as PPS is in place .
Does mortality increase after PPS?
Mortality rates for patients with the given conditions did not increase after PPS. Across all of these measures, mortality declined for all five patient groups. Similarly, the other outcome measures evidenced no post-PPS declines in quality of care.
What is PPS in healthcare?
This article describes some of the available evidence on the impact of the Medicare prospective payment system (PPS) for hospitals during its first year, on hospitals, other payers for inpatient hospital services, other providers of health care, and Medicare beneficiaries. In addition, because the impetus for the enactment of the new system stemmed from concern over the financial status of the Medicare program, the first-year impact of PPS on Medicare program expenditures is also described.
What is a PPS?
Each hospital under PPS is required to have entered into an agreement with a utilization and quality control peer review organization (PRO). The function of the PRO program, which was established under the Peer Review Improvement Act of 1982 (Subtitle C of Public Law 97-248, the Tax Equity and Fiscal Responsibility Act of 1982), is to provide for the review of:
What was the primary motivation of Congress in enacting prospective payment for Medicare inpatient hospital services?
The principal motivation of Congress in enacting prospective payment for Medicare inpatient hospital services was to constrain the depletion of the Medicare Trust Funds, therefore, a primary indicator of the success or failure of PPS would be its effect on the volume and rate of growth in Medicare program expenditures.
When was PPS implemented?
Implementation of PPS began on October 1, 1983. Objectives.
How many hospitals were under PPS in 1984?
By the end of September 1984, a total of 5,405 hospitals (81 percent of all Medicare-participating hospitals) were operating under PPS. This number represents virtually 100 percent of “PPS-eligible” hospitals (that is, short-stay acute care hospitals subject to the new payment system).
What percentage of hospital bills are covered by Medicare?
The Medicare program accounts for some 27 percent of all expenditures on hospital care in the United States, clearly establishing Medicare as the largest single consumer of hospital services ( Gibson, Waldo, and Levit, 1983 ). Given the dominant role played by Medicare, and the dramatic change in the way that Medicare pays for hospital services under PPS, it would not be unreasonable to expect that the entire hospital payment environment might be altered by the new system. Among those most likely to be directly affected by such a change are those who pay the bulk of the remaining portion of the Nation's hospital bill, the most prominent of these being the State Medicaid programs (on the public side) and the Blue Cross/Blue Shield plans (on the private side).
What is the objective of Medicare?
The most important overall objective of the new Medicare prospective payment system is to stem the growth in hospital costs while continuing to ensure the access of beneficiaries to quality health care. To achieve this objective, the system is designed to pay a single flat rate per type of discharge, as determined by the classification of each case into a diagnosis-related group (DRG). These DRG's are used to classify patients into groups that are clinically coherent and homogeneous with respect to resource use. Such a classification scheme allows for equitable payment across hospitals in that comparable services can be comparably remunerated.
How Does The Snf Pps System Determine Payment?
WhenPPS payments are adjusted for the geographic variation of wages, any costs associated with covering these costs, such as routine, ancillary, and capital-related, are covered.
How Does Medicare Pps Work?
Medicare payment is made based on fixed amounts with preferential payment systems (PPS) – the basis for paying patients by predetermined amounts through the use of this system. For a particular service, the billing level is calculated from the different groups that receive services (such as inpatient mental health services).
What Services Are Included In The Consolidated Billing Of The Snf Pps?
patients in a SNF may receive consolidated billing, which includes physical therapy, occupational therapy, speech therapy, and specialized services. Working with suppliers, physicians, and other professionals is a must for the SNF.
Is Inpatient Prospective Payment System Cost Based Or Price Based?
According to the IPPS, hospitals pay a flat rate for diagnoses regardless of whether the patient actually pays more or less than the average for any given condition. Our hospitals charge anywhere from $75 to $150 for the treatment of aspirin, for artificial hips, etc.
Does Medicare Cover Snf Costs?
SNF treatment may not be covered by Medicare after a hospitalization for a specified period of time. You’ll be asked when and how long in what condition Medicare covers ia care may be needed for a much longer period of time.
How Do Snfs Get Paid By Medicare?
Under the current Medicare Part A system, skilled nursing facilities (SNFs) with audiology and speech-language pathology services can be paid according to a prospective payment system (PPS).
How Are Snfs Paid?
Assisted living facilities already receive base rate and extra reimbursement from the per diem they receive based on the number of therapy minutes and/or nursing services they provide. Some providers and agencies may be incentivized to provide medically unnecessary care through this payment system.
What is IPF PPS?
What’s the IPF PPS? In 1999, section 124 of the Balanced Budget Refinement Act or BBRA required that a per diem (daily) PPS be developed for payment to be made for inpatient psychiatric services furnished in psychiatric hospitals and psychiatric units of acute care hospitals and critical access hospitals. Section 124 of the BBRA required the IPF ...
When was the IPF PPS implemented?
Section 124 of the BBRA required the IPF PPS be implemented for cost reporting periods beginning on or after October 1, 2002. The law also required: An "adequate patient classification system that reflects the differences in patient resource use and costs among such hospitals".
What is PPS in home health?
The Balanced Budget Act (BBA) of 1997, as amended by the Omnibus Consolidated and Emergency Supplemental Appropriations Act (OCESAA) of 1999, called for the development and implementation of a prospective payment system (PPS) for Medicare home health services.
When did the Home Health PPS rule become effective?
Effective October 1, 2000, the home health PPS (HH PPS) replaced the IPS for all home health agencies (HHAs). The PPS proposed rule was published on October 28, 1999, with a 60-day public comment period, and the final rule was published on July 3, 2000. Beginning in October 2000, HHAs were paid under the HH PPS for 60-day episodes ...
Is telecommunications technology included in a home health plan?
In response CMS amended § 409.43 (a), allowing the use of telecommunications technology to be included as part of the home health plan of care, as long as the use of such technology does not substitute for an in-person visit ordered on the plan of care.
Acknowledgments
- We wish to thank many people who helped us throughout the course of this project. Mary Harahan, who first recognized the unique opportunity offered by the 1982 and 1984 NLTCS to study PPS effects on disabled beneficiaries, catalyzed the research leading to this report. Our pr…
I. Introduction
- This report describes a study to measure changes in the pattern of Medicare service use resulting from the implementation of the prospective payment system (PPS) for Medicare hospital reimbursement. Distinct from prior studies which addressed the general Medicare population, our analysis focused on PPS effects on disabled elderly Medicare beneficiaries. Our specific aims w…
II. Background
- Medicare's prospective payment system (PPS) for hospital inpatient care was implemented in October, 1983. Under this system, payment for care is made on a fixed price per case, based on the average cost for a patient in a given Diagnosis Related Group (DRG). This system of payment provides incentives for hospitals to use resources efficiently, but it contains incentives to avoid …
III. Methods
- In the following sections, we describe the data source, the analysis plan and the statistical methods employed in this study.
IV. Results
- This section presents the results of the analyses of the pre- and post-PPS utilization of Medicare services experienced by the noninstitutionalized disabled elderly beneficiaries. The results are presented in five parts. The first part presents a general context of mortality and Medicare service use of the various subgroups of the total Medicare beneficiary population based on the total pop…
v. Discussion
- This report presented results from a study to examine the patterns of Medicare hospital, skilled nursing facility and home health agency services before and after the implementation of the hospital prospective payment system. Unlike other studies assessing PPS effects, our study population focused on disabled, noninstitutionalized. Medicare beneficiaries, and subgroups am…
VI. Conclusions
- The implementation of a prospective, fixed rate payment system for hospitals under Medicare created both a perception that hospital efficiency could be improved and concern that incentives for efficiency could result in adverse consequences for Medicare beneficiaries. Because of the recent introduction of PPS, relatively few evaluation results have been available to study its effe…
References
- Conklin, J.E. and R.L. Houchens. 1987. "PPS Impact on Mortality Rates: Adjustments for Case-Mix Severity." Final Report. HCFA Contract No. 500-85-0015, October 6. DesHarnais, S., E. Kobrinski, J. Chesney, et al. 1987. "The Early Effects of the Prospective Payment System on Inpatient Utilization and the Quality of Care," Inquiry, 24:7-16. Fitzgerald, J.F., L.F. Fagan, W.M. Tierney an…
Appendix A
- In the GOM procedure, a person may be described by more than one continuously varying case-mix dimension. Because of this, GOM is distinct from the classification methodology used to identify the DRG categories or hospital reimbursement by which homogeneous discrete groups are defined in terms of the variation of a single criterion (i.e., charges or length of stay) except w…