Glossary

prospective payment system (PPS)

A method used by Medicare to pay for many services, including inpatient and outpatient hospital services as well as services provided at skilled nursing and rehabilitation facilities. Payment rates are linked to diagnosis and determined before services are rendered, rather than being based on actual costs or charges of a specific facility. Rates are intended to cover treatment costs for a typical patient with a given diagnosis and are adjusted for factors like wages and indigent care.