by Rita Munley Gallagher, PhD, RN, C

Article originally published June 13, 2000

Prospective Payment System for Long Term Care

The Prospective Payment System (PPS) mandated for nursing homes comes as no surprise. In addition to the new prospective payment system for Medicare Part A benefits, nurses are also now affected by the Final Rule for the Minimum Data Set (MDS). This rule defines several responsibilities of registered nurses in relation to the Resident Assessment Instrument, of which the Minimum Data Set is an integral part. Understanding the MDS Final rule is essential to the practice of nursing in skilled nursing facilities (SNFs). This paper will address the parts of the MDS rule that are relevant to the prospective payment system for SNFs. Nurses are urged to explore the other implications of the MDS Final Rule as it relates to their practice.

The PPS was designed to minimize the documentation burden on nurses by using the same MDS assessment instrument to determine payment level as is used for care planning and quality assessment. The nurse's primary responsibility is simply to perform and document an accurate assessment according to a specific schedule. Care planning and care delivery are not affected by the prospective payment changes. Nurses have the opportunity to insure residents receive quality care and at the same time directly determine the payment for that care. Now that money is involved, the importance of assessments will be obvious to administrators. Nurses, rather than accountants, are the central professional in the payment system.

The PPS sets a payment level based on the functional capability and needs for service of each resident through a system known as Resource Utilization Groups (RUG-III). The system actually places similar incentives to control costs as managed care organizations attempt to do. The facility receives a specific payment for each day a resident is at a RUG-III determined level of care. How the money is spent is up to the facility, as long as the resident receives all needed care.

The PPS system was designed to be self-balancing with care, quality, and payment based on the same tool. In some settings, there may be pressure to "enhance" assessment to qualify for payment above that actually due for the resident. Any such pressure must be rejected. Nurses must understand the process of both resident assessment and prospective payment to insure appropriate care, appropriate payment, and to avoid potential pitfalls. Professional practice is the only winning strategy.