How are hospitals paid under the Prospective Payment System (PPS)?

Under the Prospective Payment System (PPS), hospitals are compensated through a predetermined payment method that is designed to be faster and more uniform. This system assigns a fixed payment rate for specific diagnoses, which streamlines the reimbursement process and tells hospitals exactly how much they will receive for treating patients with certain conditions.

This approach contrasts with methods that rely on actual costs or vary significantly based on individual services rendered. By establishing flat rates that are set in advance, the PPS helps control costs and encourages efficiency in hospital operations. It diminishes the variability in payments that could arise from fluctuating patient care costs or individual patient circumstances, fostering a more predictable financial environment for both providers and payers.

Thus, the key feature of PPS is the emphasis on uniformity and timeliness in payments rather than relying on retrospective analysis of costs or subjective measures such as patient satisfaction surveys.