What is a prospective payment ...

[kshipps]

What is a prospective payment system?

Question 2

Compare and contrast capitation payment, per diem payment, and fee schedules.

[Joy Chen]

Answer to Question 1

An inpatient payment system in which rates are established prior to the provision of care. Each patient's diagnoses are categorized into diagnosis-related groups (DRGs). Each DRG is assigned a payment weight based on the average resources to treat patients within the DRG. DRGs are based on the principal and secondary diagnoses, co-morbidities, and complications. The goal of the system is to encourage facilities to manage their operations more efficiently by finding ways to deliver cost-effective patient care without sacrificing the quality of care rendered to the patient.

Answer to Question 2

Capitation payment: a fixed dollar amount for each covered person for providing a predetermined set of health services for a specific period of time. Health care providers are responsible for providing the care needed for each patient for whom they receive capitation. The health care provider assumes the risk for the cost and the frequency of the services provided.
Per diem payment: flat daily rate paid regardless of the type of care given to the patient; used primarily in inpatient facilities and skilled nursing facilities.
Fee schedules: flat rate per procedure, visit, or service that is negotiated between the MCO and the provider. Negotiation of rates can be based on historical data or can use the resource-based relative value scale as the base and negotiate the conversion factor (dollar amount per unit) that provides appropriate reimbursement. Another method of creating a fee schedule is for payers to base the fee on a percentage of the Medicare fee schedule.