Certified Nurse Manager and Leader (CNML) Practice Test

What is NOT a common feature of a Prospective Payment System?

1. Pre-estimated payments based on diagnosis

2. Payments adjusted for readmission rates

3. Use of Diagnostic-Related Groups for billing

4. Cost reimbursement based on actual expenses

The correct answer is: Cost reimbursement based on actual expenses

The feature that does not align with the characteristics of a Prospective Payment System is cost reimbursement based on actual expenses. In a Prospective Payment System (PPS), facilities receive predetermined payments for patient care based on factors such as the diagnosis, rather than the actual costs incurred during treatment. This allows for a more predictable budgeting process for healthcare providers. Under PPS, payments are typically established beforehand using methods such as Diagnostic-Related Groups (DRGs), which classify patients based on their diagnoses and expected resource use. This system incentivizes efficiency, as providers are encouraged to deliver care within the set payment amount, potentially improving overall cost management and resource allocation. In contrast, cost reimbursement based on actual expenses is characteristic of different payment systems, where healthcare providers bill insurance companies or government programs for the actual costs incurred, which can lead to variations in payment and less predictability in budgeting. This fundamental difference in payment structure illustrates why the selected answer aligns with the concept of a Prospective Payment System.