For what variations in resource consumption does the hhpps account?

Historical PersPective of cMs reiMburseMent systeMs In 1964 the Johnson administration avoided opposition from hospitals for passage of the Medicare and Medicaid programs by adopting retrospective reasonable cost-basis payment arrangements originally established by BlueCross. Reimburse- ment according to a retrospective reasonable cost system meant that hospitals reported actual charges for inpatient care to payers after discharge of the patient from the hospital. Payers then reimbursed hospitals 80 percent of allowed charges. Although this policy helped secure passage of Medicare and Medicaid (by entic- ing hospital participation), subsequent spiraling reimbursement costs ensued. Shortly after the passage of Medicare and Medicaid, Congress began inves- tigating prospective payment systems (PPS) (Table 9-1), which established pre- determined rates based on patient category or the type of facility (with annual increases based on an inflation index and a geographic wage index): ● Prospective cost-based rates are also established in advance, but they are based on reported health care costs (charges) from which a predetermined per diem (Latin meaning “for each day”) rate is determined. Annual rates are usually adjusted using actual costs from the prior year. This method may be based on the facility’s case mix (patient acuity) (e.g., resource utilization groups [RUGs] for skilled nurs- ing care facilities). ● Prospective price-based rates are associated with a particular category of patient (e.g., inpatients), and rates are established by the payer (e.g., Medicare) prior to the provision of health care services (e.g., diagnosis-related groups [DRGs] for inpatient care). TABLE 9-1 Prospective payment systems, year implemented, and type PROSPECTIVE PAYMENT SYSTEM YEAR TYPE Ambulance Fee Schedule 2002 Ambulatory Surgical Center (ASC) Payment Rates 1994 Clinical Laboratory Fee Schedule 1985 Durable Medical Equipment, …

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