Which facility payment system uses a cost-based rate?

The inpatient psychiatric facility payment system (PPS) is notable for utilizing a cost-based rate. This means that the payments made for services provided in a psychiatric facility are determined based on the actual costs incurred by the facility rather than predetermined rates or prospective payment systems used by other types of facilities.

In this system, facilities are reimbursed based on their reported costs, which can vary significantly depending on the nature and intensity of the services they provide. This reimbursement approach is particularly well-suited for psychiatric facilities because the cost of care can be highly individualized, depending on patient needs, length of stay, and the complexity of treatments involved.

Other payment systems, such as those for home health care, outpatient services, and skilled nursing facilities, typically utilize prospective payment models. These models set predetermined rates based on factors like diagnosis, service types, and other criteria, rather than allowing for reimbursement based on an individual facility’s incurred costs. This distinction helps to clarify why the inpatient psychiatric facility PPS specifically employs a cost-based payment rate.