Certified Nurse Manager and Leader (CNML) Practice Test

What system utilizes Diagnostic-Related Groups for billing purposes?

1. Exclusive Provider Organization

2. Health Maintenance Organization

3. Prospective Payment System

4. Fee-for-Service model

The correct answer is: Prospective Payment System

The Prospective Payment System (PPS) is the correct answer as it is specifically designed to use Diagnostic-Related Groups (DRGs) for billing purposes. This system establishes predetermined payment rates for healthcare services based on the diagnosis and associated treatments provided to patients. Under PPS, healthcare providers are reimbursed a fixed amount for a patient’s hospital stay, which is determined by the DRG assigned to that patient's diagnosis rather than the actual cost incurred during the treatment process. The integration of DRGs into the PPS was a key shift towards promoting efficiency within healthcare settings, effectively encouraging providers to manage their resources wisely while maintaining quality care. The fixed reimbursement amount incentivizes hospitals to limit lengths of stay and costs while ensuring patients receive the necessary care. In this context, other choices do not utilize DRGs in the same manner. Exclusive Provider Organizations (EPOs) and Health Maintenance Organizations (HMOs) focus more on network restrictions and preventive care, rather than on specific diagnosis-based billing. Meanwhile, the Fee-for-Service model allows for billed costs based on individual services rendered, which contrasts with the fixed payment structure seen in PPS.