Prospective Payment System In Health Care

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Under the Balanced Budget Act (BBA), the Health Care Financing Administration (HCFA) put into effect a nationwide Prospective Payment System (PPS) within Skilled Nursing Facilities to reimburse inpatient service costs for beneficiaries covered under Medicare Part A as of July 1,1998 (Skilled Nursing facility PPS, 2013). Generally, Medicare Part A covers beneficiaries within the following inpatient settings: SNFs, hospitals, nursing homes, hospice, and home health services (What Part A Covers, n.d.). Medicare Part A uses a Prospective Payment System at a per diem rate. In other words, Medicare Part A pays SNFs pre-determined daily rates for patient care, meaning they are dictating the daily allowance of expenses used for services (Skilled Nursing…show more content…
The American Health Care Association (AHCA) closely monitors these rules that include payment and policy changes taking into account feedback from members and impact on the profession (SNF Prospective, 2016). A federal rate or Prospective Payment System rate was initially set based on inflation and average Medicare Part A costs received in 1995 by SNFs and are adjusted yearly based on estimated increases in the SNF market basket index, which is “a measure of the national price level for the goods and services SNF’s purchase to provide care” (Skilled Nursing Facility Services, 2014). Payment rates are also adjusted for case mix (type/mix of patients within a setting) and wage variation within different regions (Skilled Nursing Facility Services, 2014). The daily payment rates are adjusted for case mix using a resource utilization group classification system (RUG, version IV), which is based on the level of services provided within a designated assessment period (Skilled Nursing Facility Services, 2014). This system is used in conjunction with a Minimum Data Set (MDS), an extensive assessment tool used to document the level of care. MDS assessment forms are filled out upon admission…show more content…
They are as a result treating more patients, are under more pressure and thus reducing the quality of care for patients. A recent AOTA article describing the current PPS in SNFs concluded that need for the Centers for Medicare and Medicaid Services (CMS) to implement a new system of therapy payment is crucial because patients are not being given quality care they need due to dictated frequency of therapy (Red Flags, 2015). It further suggests that the focus of new payment method should be on patient characteristics rather than the quantity of therapy delivered (Red Flags, 2015). Therapists also have to guess what services they are going to deliver to a patient rather than in the past when itemized bills or actual costs were sent to insurance companies after the services were provided (cost-based reimbursement, retrospective payment plan). Current and future occupational therapists should have an understanding of the Medicare A PPS system and be aware of annual PPS rule changes if working in a skilled nursing facility or related inpatient setting. We should also be informed about policy and payment issues in order to advocate for quality of care over quantity of care in the
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