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PubMed2000

Surviving the prospective payment system: potential problems and solutions to ensure quality of care.

In response to diagnosis-related group payment systems and changing social structures, many hospital systems have created alternative discharge sites, thus shifting care to subacute units offering comprehensive inpatient programs of cost-effective restorative care. The growth in expenditures for these postacute services led to the implementation of the prospective payment system (PPS). This article discusses factors involved in calculating reimbursement and solutions to such problems as inadequate reimbursement, quality of care, and documentation requirements. For subacute care to succeed clinically and financially, a basis for collaboration between hospital-based referring physicians and subacute unit directors must be established; patient satisfaction and quality of care must be monitored closely; and a well-trained nursing staff with frequent in-service training in patient care should be employed. The reorganization tactics suggested in this article may help a subacute facility function in an efficient way at acceptable costs while maintaining high quality patient care.

Hospital Units↗
PubMed1990

Transfers of hospitalized psychiatric patients under Medicare's prospective payment system.

Medicare's reimbursement policy provides payment incentives for hospitals to transfer psychiatric patients to another acute-care facility, especially when the destination facility is exempt from Medicare's prospective payment system. The authors found, however, that transfers were relatively infrequent in 1985, accounting for only approximately 3.4% of all psychiatric hospitalizations under Medicare. The most common type of transfer was from a nonspecialized general hospital bed to a Medicare-exempt psychiatric unit within the same hospital. Given that increasing financial pressures may result in a rise in the number of transfers, the authors discuss potential reforms of Medicare reimbursement for these cases.

Centers for Medicare and Medicaid Services, U.S.↗
PubMed1988

Insurance principles and the design of prospective payment systems.

This paper applies insurance principles to the issues of optimal outlier payments and designation of peer groups in Medicare's case-based prospective payment system for hospital care. Arrow's principle that full insurance after a deductible is optimal implies that, to minimize hospital risk, outlier payments should be based on hospital average loss per case rather than, as at present, based on individual case-level losses. The principle of experience rating implies defining more homogenous peer groups for the purpose of figuring average cost. The empirical significance of these results is examined using a sample of 470,568 discharges from 469 hospitals.

Costs and Cost Analysis↗
PubMed1992

Change in the Medicare case-mix index in the 1980s and the effect of the prospective payment system.

Persistent increases in the Medicare case-mix index over the 1980s have been ascribed to changes both in medical treatment ("real changes") and in the way medical information is recorded ("coding changes") in hospitals. These changes have been attributed, in the absence of appropriate data and analyses, to the incentives of the Medicare prospective payment system (PPS). Using data for 1980-1986 from 235 hospitals, we estimate the effect on the Medicare case-mix index of a series of variables that reflect medical treatments and coding practices. Each of these underlying real or coding variables was changing prior to PPS and would likely have continued to change even in the absence of PPS. Furthermore, PPS may have had a distinct effect on these variables. These underlying trends and the PPS effects must each be estimated. Thus, the analysis begins by developing separate estimates for each of these real and coding variables (1) in the absence of PPS (autonomous effects) and (2) as a result of PPS (induced effects). Then, changes in the case-mix index are regressed against all of these variables to determine the degree to which specific autonomous real or coding variables or induced real or coding variables actually influenced measured case mix. Results show that real and coding changes each accounted for about half of the change in the Medicare case-mix index between 1980 and 1986, with the influence of coding starting to wane by 1986. PPS-induced factors explain about 80 percent of the change in measured case mix over time, autonomous factors about 20 percent. Especially powerful determinants of case-mix change included PPS-induced substitution of surgical for medical care and PPS-induced improvements in the accuracy of coding that led to assignment of patients to higher-weighted DRGs. Also, stringent Medicare peer review organizations appeared to restrain rises in case-mix indexes for their hospitals. Outpatient substitution for inpatient treatment, which others attributed to PPS, was well underway before PPS was announced.

Abstracting and Indexing↗
PubMed1991

Prospective payment system for inpatient hospital capital-related costs--HCFA. Final rule.

We are revising the Medicare payment methodology for hospital inpatient capital-related costs for hospitals paid under the prospective payment system. As required by section 1886(g) of the Social Security Act, we are replacing the reasonable cost-based payment methodology with a prospective payment methodology for hospital inpatient capital-related costs. Under this prospective payment methodology, a predetermined amount per discharge will be made for Medicare inpatient capital-related costs.

Capital Expenditures↗
PubMed2005

Medicare program; prospective payment system and consolidated billing for skilled nursing facilities for FY 2006. Final rule.

In this final rule we update the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs), for fiscal year (FY) 2006. Annual updates to the PPS rates are required by section 1888(e) of the Social Security Act (the Act), as amended by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA), the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), relating to Medicare payments and consolidated billing for SNFs. This final rule also responds to public comments submitted on the proposed rule published on May 19, 2005 (70 FR 29070), and promulgates provisions set forth in that proposed rule, along with several additional technical revisions to the regulations.

Accounts Payable and Receivable↗
PubMed1988

Trends and regional variations in hospital utilization and quality during the first two years of the prospective payment system.

The Commission on Professional and Hospital Activities monitored both Medicare and non-Medicare hospital discharges for a cohort of 646 U.S. nonfederal, short-term general hospitals from nonwaivered states over the period 1980-1985. Using this data base and a linear forecasting model, we studied utilization and quality-of-care trends for the years preceding implementation of the prospective payment system (PPS) and the two years following its implementation. We found that Medicare discharges declined significantly in both 1984 and 1985, length of stay was unchanged from 1984 to 1985 (except in the West, where further declines occurred), and skilled nursing facility and home health care use for postdischarge care increased both years. Our unadjusted measures of quality showed no adverse effects in either 1984 or 1985 for Medicare patients.

Commission on Professional and Hospital Activities↗
PubMed1992

Medicare program; prospective payment system for inpatient hospital capital-related costs; correction--HCFA. Final rule; correction.

In the August 30, 1991 issue of the Federal Register (FR Doc. 91-20779) (56 FR 43358), we revised the Medicare payment methodology for inpatient hospital capital-related costs for hospitals paid under the prospective payment system. We replaced the reasonable cost-based payment methodology with a prospective payment methodology for capital-related costs. This notice corrects errors made in that document.

Capital Expenditures↗
PubMed1998

Medicare program; prospective payment system for hospital outpatient services; extension of comment period--HCFA. Notice of extension of comment period for proposed rule.

This notice extends the comment period for a proposed rule published in the Federal Register on September 8, 1998, (63 FR 47552). In that rule, as required by sections 4521, 4522, and 4523 of the Balanced Budget Act of 1997, we proposed to eliminate the formula-driven overpayment for certain outpatient hospital services, extend reductions in payment for costs of hospital outpatient services, and establish in regulations a prospective payment system for hospital outpatient services (and for Medicare Part B services furnished to inpatients who have no Part A coverage.) The comment period is extended for 60 days.

Ambulatory Care↗
PubMed1990

Hospital financial performance under the prospective payment system by type of admission: psychiatric versus medical/surgical.

We performed detailed simulations of DRG-based payments to general hospitals for treatment of nonexempt psychiatric and medical/surgical patients under Medicare's prospective payment system (PPS). We then compared these results to calculated costs for the same patients. Hospitals without specialized psychiatric units tend to fare better financially on their psychiatric than on their medical/surgical caseloads, although the levels of gain for these two types of patients are correlated. Hospitals with nonexempt psychiatric units generally have similar rates of gain on psychiatric and medical/surgical patients. Comparing psychiatric treatment in "scatter-bed" sites with that provided in nonexempt units, the higher rate of gain under PPS for treatment in scatter beds results largely from shorter lengths of stay. We discuss hospital behavior and the relationships between treatment of psychiatric illness under DRG-based payment and its treatment in exempt psychiatric units, which are excluded from DRG-based payment.

Computer Simulation↗
PubMed2004

Medicare program; hospital outpatient prospective payment system; payment reform for calendar year 2004. Interim final rule with comment period.

This interim final rule with comment period implements provisions of the Medicare Prescription Drug, Improvement, and Modernization Act (DIMA) of 2003 that affect the Medicare outpatient prospective payment system (OPPS) that become effective January 1, 2004. Sections 303 and 621 of the DIMA include provisions that alter the methods for drug payment in hospital outpatient departments, some of which become effective January 1, 2004. These provisions affect the methodology for paying for pass-through and non-pass-through drugs under the OPPS. Further, the new law includes a requirement that all brachytherapy sources be paid separately. Section 411 of the DIMA reinstates the hold-harmless protection for small rural hospitals with fewer than 100 beds and extends that protection to sole community hospitals in rural areas.

Economics, Hospital↗
PubMed2000

Medicare program; prospective payment system and consolidated billing for skilled nursing facilities--update. Health Care Financing Administration (HCFA), HHS. Final rule.

This final rule sets forth updates to the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs), for fiscal year 2001. Annual updates to the PPS rates are required by section 1888(e) of the Social Security Act, as amended by the Medicare, Medicaid and State Child Health Insurance Program Balanced Budget Refinement Act of 1999, related to Medicare payments and consolidated billing for SNFs. In addition, this rule sets forth certain conforming revisions to the regulations that are necessary in order to implement amendments made to the Act by section 103 of the Medicare, Medicaid and State Child Health Insurance Program Balanced Budget Refinement Act of 1999.

Centers for Medicare and Medicaid Services, U.S.↗
PubMed2002

The drive for quality care in US nursing homes in the era of the prospective payment system.

The quality of nursing home care has often given rise to concern from many interested stakeholders. In the US, this has led to the implementation of a major legislative framework in the form of the Nursing Home Reform Act, which sought to improve the quality of care through regulation and inspections. Research has shown that certain elements of care have improved but much remains to be done. Additional pressure is now being placed on the nursing home sector through the introduction of a prospective payment system (PPS), which sets limits on reimbursement for services for Medicare-covered stays. It has been proposed that this new system of payment may lead to difficulties in accessing nursing home care for patients who are deemed to be costly, and initial assessments suggest that patients are now carefully screened before being admitted to nursing homes. This may have major implications for patients who require multiple and expensive drug therapy and other interventions. Although the Nursing Home Reform Act seeks to drive forward the quality agenda in nursing home care, research is urgently required to evaluate the impact of the PPS which may force this healthcare sector to emphasise reducing costs at the expense of residents' needs.

Aged↗
PubMed2006

Medicare program; home health prospective payment system rate update for calendar year 2007 and Deficit Reduction Act of 2005 changes to Medicare payment for oxygen equipment and capped rental durable medical equipment; final rule.

This final rule sets forth an update to the 60-day national episode rates and the national per-visit amounts under the Medicare prospective payment system for home health services. In addition, this final rule sets forth policy changes related to Medicare payment for certain durable medical equipment for the purpose of implementing sections 1834(a)(5) and 1834(a)(7) of the Social Security Act, as amended by section 5101 of the Deficit Reduction Act of 2005. This final rule also responds to public comments on the August 3, 2006, proposed rule that pertain to a number of issues including the requirement that home health payments are based on the reporting of specific quality data by home health agencies.

Durable Medical Equipment↗
PubMed1990

Assessing the effects of the Medicare Prospective Payment System on the demand for VA inpatient services: an examination of transfers and discharges of problem patients.

An examination of patient data from three medical districts that vary in urban/rural composition and in their proportion of proprietary hospitals was undertaken to determine if high-cost patients whose illnesses place them in "problem" DRGs (diagnosis-related groups identified as "problems" through interviews with private hospital administrators and from information published by the Wisconsin Hospital Association) are being shifted from non-Department of Veterans Affairs (non-VA) hospitals to VA hospitals. Two outcome measures were employed to detect shifting: patient transfers between non-VA and VA hospitals and discharges of veterans in a sample of DRGs identified as unprofitable by private hospitals. A comparison of patient transfers for fiscal year 1982 and fiscal year 1984 (pre- and post-DRG implementation) revealed substantial increases in the number of transfers, but there appeared to be no concentration of transfers in particular DRGs. An examination of discharges for FY 1982 and FY 1984 within 21 problem DRGs showed average increases ranging from 27 percent to 41 percent among patients aged 65 years or older. A comparison of discharges within a sample of 21 randomly selected DRGs showed either no increase or small decreases in discharges from FY 1982 to FY 1984. The possibility is discussed that some of the cost reductions (or slowing of the rise in costs) attributed to the prospective payment system are merely phantom savings. Hospitals may simply be shifting costs from Medicare to the VA system.

Aged↗