PROSPECTIVE PAYMENT SYSTEM Meaning and
Definition
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A prospective payment system is a method of payment used in the healthcare industry that determines the amount of reimbursement to be paid to healthcare providers in advance. This system sets predetermined rates for specific services or procedures, allowing healthcare providers to know in advance how much they will be paid for their services.
The prospective payment system is typically used by insurance companies and government agencies, such as Medicare and Medicaid, to control costs and provide transparency in healthcare pricing. It is based on a predetermined fee schedule that takes into account factors such as the type of service provided, the complexity of the procedure, and the location of the healthcare facility.
Under the prospective payment system, healthcare providers are paid a fixed amount for each service or procedure, regardless of their actual cost. This creates an incentive for providers to deliver efficient and cost-effective care, as they will not be reimbursed for any costs that exceed the predetermined rate.
The prospective payment system has been implemented to shift the focus of healthcare providers from quantity to quality of care. By providing a fixed reimbursement amount, this system encourages providers to deliver efficient and effective services, thus potentially improving patient outcomes and reducing healthcare costs. However, it is important to note that the implementation of a prospective payment system can have various implications for healthcare providers and may require adjustments in their operational and financial processes.
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