Prospective Payment Systems


The third book in the Healthcare Payment Systems series, Prospective Payment Systems examines the various types of prospective payment systems (PPS) used by healthcare providers and third-party payers. Emphasizing the basic elements of PPS, it considers the many variations of payment for hospital inpatient and outpatient services, skilled nursing facilities, home health agencies, long-term hospital care, and rehabilitation facilities along with other providers.

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The third book in the Healthcare Payment Systems series, Prospective Payment Systems examines the various types of prospective payment systems (PPS) used by healthcare providers and third-party payers. Emphasizing the basic elements of PPS, it considers the many variations of payment for hospital inpatient and outpatient services, skilled nursing facilities, home health agencies, long-term hospital care, and rehabilitation facilities along with other providers.

The book describes the anatomy of PPS, including cost reports, adjudication features and processes, relative weights, and payment processes. It outlines the features and documentation requirements for Medicare Severity Diagnosis Related Groups (MS-DRGs), the Medicare Ambulatory Payment Classifications (APCs), Medicare HHPPS, Medicare Skilled Nursing Resource Utilization Groups (RUGs), and private third-party payers.

  • Provides a framework for understanding and analyzing the characteristics of any PPS
  • Discusses Medicare prospective payment systems and approaches
  • Includes specific references to helpful resources, both online and in print
  • Facilitates a clear understanding of the complexities related to PPS—covering specific topics at a high level and revisiting similar topics to reinforce understanding

Complete with a detailed listing of the acronyms most-commonly used in healthcare coding, billing, and reimbursement, the book includes a series of case studies that illustrate key concepts. It concludes with a discussion of the challenges with PPS—including compliance and overpayment issues—to provide you with the real-world understanding needed to make sense of any PPS.

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Product Details

  • ISBN-13: 9781439873014
  • Publisher: Taylor & Francis
  • Publication date: 3/2/2012
  • Pages: 219
  • Product dimensions: 6.80 (w) x 9.90 (h) x 0.80 (d)

Meet the Author

Duane C. Abbey, Ph.D., is a management consultant and president of Abbey & Abbey Consultants Incorporated. Based in Ames, Iowa, Abbey & Abbey specializes in healthcare consulting and related areas. His work in healthcare now spans more than 25 years, earned his graduate degrees at the University of Notre Dame and Iowa State University. Today he spends about half his time developing and teaching workshops (for students who affectionately quip that the Federal Register is his favorite reading material) and making presentations to professional organizations. He devotes the other half to consulting work that involves performing chargemaster reviews and compliance reviews, providing litigation support, and conducting reimbursement studies.

Dr. Abbey also uses his mathematical and financial background to perform assessments, develop complex financial models, and conduct various types of statistical work. His studies in the field of neurolinguistic programming have enhanced his ability to provide organizational communication facilitation services for healthcare organizations. He also provides litigation support services for attorneys representing healthcare providers in legal proceedings.

Dr. Abbey can be contacted by e-mail at

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Table of Contents

Introduction to Prospective Payment Systems
Preliminary Comments
Overview of Healthcare Payment Systems
Claims Filing and Payment
Deductibles and Copayments
Overview of Medicare Prospective Payment Systems
Private Third-Party Payer and Prospective Payment Systems
Payment System Interfaces
Healthcare Provider Use of Prospective Payment Systems to Set Charges
Summary and Conclusion

Healthcare Provider Concepts
Non-Physician Practitioners and Providers
Special Hospitals with Specialized Prospective Payment Systems
Hospitals and Integrated Delivery Systems
Special Provider Organizations
DME Suppliers
Skilled Nursing Facilities
Home Health Agencies
Independent Diagnostic Testing Facilities
Comprehensive Outpatient Rehabilitation Facilities
Clinical Laboratories
Ambulatory Surgical Centers
Summary and Conclusion

Anatomy of a Prospective Payment System
Necessary Elements
PPS Coverage
PPS Unit of Service
PPS Classification Systems
Developing Categories or Groups
Determining Payment Amounts
Unusual Circumstances for Additional Payments
Special Incentives/Constraints
Coding for PPSs
Cost Reports
Hospital Chargemasters
Relative Weights
Conversion Factor
Chapter Summary

Medicare Severity Diagnosis Related Groups (MS-DRGs)
Historical Background
MS-DRG Design Features
Unit of Service
Classification System
MS-DRG Categories
MS-DRG Grouping
MS-DRG Relative Weights
Case-Mix Index (CMI)
ICD-10 Coding: The Key for Optimizing MS-DRG Reimbursement
Conversion of M-DRGs to MS-DRGs
Payment Process
Cost Outliers
Special Types and Designations of Hospitals
Documentation Features
Additional Features for MS-DRGs
3-Day Preadmission Window
Post-Acute Care Transfer
Present on Admission (POA)
Updating Process for MS-DRGs
Variations of DRGs
Compliance Considerations
Quality Initiatives and Electronic Health Records
Summary and Conclusion

Ambulatory Payment Classifications (APCs)
Historical Background
Challenges for Hospital Outpatient Prospective Payment
Ambulatory Patient Groups (APGs)
Three-Day Window of Service
Significant Procedure Consolidation
E/M Service Bundling
APC Design and Implementation Parameters
Medicare APC Coverage
Encounter Driven
APC Classification Systems: CPT and HCPCS
CPT Codes and Modifiers
HCPCS Codes and Modifiers
National Correct Coding Initiative (NCCI) Edits
APC Status Indicators (Sis)
Composite APCs
Global Surgical Package (GSP)
Payment under APCs
Special Payment Considerations
APC Grouper/Pricer
Deductibles and Copayments
The Provider-Based Rule
Provider-Based Clinics
Split Billing: 1500 plus UB-04
Establishing Fee Schedules
Billing Privileges
Special Situations
Ambulatory Surgical Centers
Payment System Interfaces for APCs
APCs and the Federal Register Process
Quality Reporting and Compliance for APCs
Summary and Conclusion

Other Prospective Payment Systems
Skilled Nursing Facilities (SNFs)
Classification and Grouping
SNF Payment
SNF Issues
Home Health
Unit of Service/Unit of Payment
Home Health Payment
Long-Term Care Hospitals (LTCHs)
Classification and Grouping for LTCHs
Other Features for the LTCH-PPS
Inpatient Rehabilitation Facilities
Inpatient Psychiatric Facilities (IPFs)
End-Stage Renal Dialysis (ESRD)
Private Third-Party Payer Utilization of PPSs
Summary and Conclusion

Conclusion and Endnote

Appendix A: Case Studies
Chapter 1 Case Studies
Chapter 2 Case Studies
Chapter 3 Case Studies
Chapter 4 Case Studies
Chapter 5 Case Studies
Chapter 6 Case Studies

Appendix B: Acronyms

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