Problem: Medicare payments for health care organizations have a complex set of rules. Medicare has paid skilled nursing facilities on a prospective basis since July 1, 1998. The rate is a per diem rate that is calculated to include the costs of all services, including routine, ancillary, and capital. Per diem payments for each admission are case mix adjusted using a resident classification system known as resource utilization groups.
Medicare uses the inpatient prospective payment system. A prospective payment system is one in which the healthcare organization receives a certain payment for each episode of care provided to a patient, regardless of the actual amount of care used. The amount of the payment is based on the value of a certain diagnosis as determined by Centers for Medicare & Medicaid Services in the form of diagnosis-related groups. Please further explain this system.