Prospective payment system
A prospective payment system (PPS) is a means of determining insurance reimbursement to hospitals based on predetermined prices, commonly from Medicare. Payments are typically based on codes provided on the insurance claim. Examples of these codes include:
- Diagnosis-related groups – for hospital inpatient claims
- Ambulatory Payment Classification – for hospital outpatient claims
- Current Procedural Terminology – for other outpatient claims
The PPS was established by the Center for Medicare and Medicaid Services (CMS) in 1983, specifically to address expensive hospital care. Regardless of services provided, payment was of an established fee. The idea was to encourage hospitals to tame increasingly expensive hospital care.
- "Overview Prospective Payment Systems". Centers for Medicare & Medicaid Services.
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