What is a PPS Code in Medical Billing

Understanding the Term PPS

The Centers for Medicare and Medicaid Services (CMS) refers to the Prospective Payment System (PPS) as a “method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount. The payment amount for a particular service is derived based on the classification system of that service (for example, diagnosis-related groups for inpatient hospital services).”

With PPS the health care provider is obliged to give quality care under low costs and eliminate unnecessary services to increase the reimbursement amount. So matter how much amount is charged for the patient care, the reimbursement will be made based on a predetermined amount. In a few words PPS promises to offer both efficient and cost-effective health care services to Medicare patients.

PPS Classification

CMS classifies Prospective Payment System (PPS) into the following categories:

1. 1 Acute Inpatient PPS or Inpatient PPS (IPPS)

a. “The operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital      Insurance) based on prospectively set rates”L

b. Cases are categorized into Diagnosis-related Group (DRG) with a payment weight assigned      to each DRG based on average resources used to treat Medicare patients

c. The base payment rate is divided into two categories—labor-related and non-labor share.

1. 2 Federally Qualified Health Centers PPS (FQHC PPS)

a. The payment is made based on a national rate.

b. The payment is thereafter adjusted according to the location of where the services are      furnished.

c. For a new patient or an Initial Preventive Physical Exam (IPPE) or Annual Wellness Visit (AWV)      the rate is increased by 34.16 percent

1. 3 Home Health PPS (HH PPS)

a. Predetermined base payment is made to the home health agencies (HHAs) and is adjusted for:

i. beneficiary’s health condition and care needs

ii. and geographic differences in wages for HHAs across the country

1. 4 Hospice

a. The payment for continuous home care, general inpatient care, inpatient respite care, and      routine home care at per diem rate.

1. 5 Inpatient Psychiatric Facility PPS (IPF PPS)

a. “A standardized federal per diem payment rate” is paid “based on the sum of the national      average routine operating, ancillary, and capital costs for each patient day of psychiatric care in      an IPF, adjusted for budget neutrality.”

b. “The federal per diem payment rate is adjusted to reflect certain patient and facility      characteristics that were associated with statistically significant cost differences.”

1. 6 Inpatient Rehabilitation Facility PPS (IRF PPS)

a. The patients are classified into distinct groups based on clinical characteristics and expected      resource needs. Separate payments are made for each group based on the application of case      and facility-level adjustments.

1. 7 Long-Term Care Hospital PPS (LTCH PPS)

a. Includes a hospital that has an average inpatient length of stay of greater than 25 days.

b. It’s a per discharge system with Diagnosis-related Group (DRG) patient system classification.

1. 8 Skilled Nursing Facility PPS (SNF PPS)

a. A per diem payment system covering all costs (routine, ancillary, and capital) under Part A of the     Medicare program.

PPS plays an important role in regulating the health care industry to provide the best medical services to Medicare patients and also, regulate the health care provider’s revenue cycle by ensuring the fixed reimbursement rate.