Prospective Payment System (PPS)

The Prospective Payment System (PPS) is a method used by healthcare programs, like Medicare, to determine how much they will pay hospitals for specific services in advance. Instead of paying for each individual treatment, the program assigns a fixed amount based on the type of service or diagnosis. This encourages hospitals to provide efficient care, as they keep any savings if they spend less than the fixed amount but must cover costs if they spend more. PPS helps control healthcare costs while ensuring patients receive necessary treatments.