Prospective Payment Systems Overview

By using the established framework of Medicare’s Prospective Payment System (PPS), health plans share the risk with their provider network, making each group accountable for the portion of risk that they can effectively manage.

OptumInsight can help you develop fair and defensible reimbursement rates when applying PPS methodologies to commercial business, or for creating payment strategies for Medicare Advantage and Medicaid programs.

• Analyze PPS rates on a regional or nationwide basis
• Rely on accurate data in contract negotiations
• Five state-specific rate files available  

Reduce risk
With PPS, health plans retain only the risk of underwriting health care utilization for the population of enrollees. By sharing the risk, each group is accountable for that portion of risk they can effectively manage.

Provider contracting
OptumInsight customers are using PPS data to reduce costs by negotiating provider contracts. Medicare inpatient (DRG-based) payment rates are typically 30 percent to 35 percent of charges, which gives payers the data needed to negotiate greater discounts.

An established methodology
The biggest benefit to PPS is an established methodology. Providers are familiar with using it for billing and reimbursement under DRGs for inpatient care and APCs for outpatient care. PPS is used by many regulatory bodies, making it widely understood and accepted in the hospital community.