What is the primary purpose of a Prospective Payment System (PPS)?

A Prospective Payment System (PPS) is designed primarily to reimburse hospitals and healthcare providers a predetermined, fixed amount per case, rather than on a fee-for-service basis. This system emphasizes cost control and efficiency, where the payment is established ahead of time based on various patient characteristics and diagnoses, typically influencing the types of services provided.

This fixed rate is established through classifications systems like Diagnosis-Related Groups (DRGs), which categorize patients based on their diagnoses and the care they receive. By using a PPS, hospitals are incentivized to manage their resources and costs effectively since they receive the same amount per case regardless of the actual costs incurred during treatment. As a result, there is less financial incentive for over-utilization of services or prolonged hospital stays, thus streamlining processes and improving overall healthcare delivery.

In contrast, options that suggest reimbursement based on patient visits, discounts on services, or patient satisfaction do not accurately capture the core aspect of how a PPS functions, which focuses on fixed payments per episode of care rather than per individual service or patient feedback.