what is pps in healthcare

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, such as diagnosis-related groups for inpatient hospital services. CMS uses separate PPSs for reimbursement to acute inpatient hospitals, home health agencies, hospice, hospital outpatient, inpatient psychiatric facilities, inpatient rehabilitation facilities, long-term care hospitals, and skilled nursing facilities. PPS is intended to motivate healthcare providers to structure cost-effective, efficient patient care that avoids unnecessary services. The goal is to provide quality patient care that engages patients, and strives for faster diagnosis and treatment, shorter hospital stays, and lower costs. The primary benefit of prospective payment systems is the predictability they provide to healthcare providers. PPS in healthcare eliminates the hassle and uncertainty of traditional fee-for-service models by offering a set rate for each episode of care. This also helps prevent providers from overbilling or upcoding, as the prospective rate puts strict limits on what can be charged.