Under the Prospective Payment System, how were nursing facilities reimbursed?

Under the Prospective Payment System (PPS), nursing facilities were reimbursed through a bundled payment system that consolidates multiple costs into a single payment rate for care provided to residents. This means that rather than being reimbursed based on the actual costs incurred by the facility, facilities receive a predetermined rate based on the specific classification of the resident's needs and the level of care required.

Bundling of costs is a necessity to simplify reimbursements and encourage efficiency in care provision. The system effectively assigns a fixed payment for each resident based on diagnosis-related groups (DRGs), meaning that nursing homes must manage their resources within the confines of that payment, promoting cost-effectiveness.

The assertion that costs were never bundled is incorrect as the key feature of the PPS is its bundling approach, which streamlines the process and encourages facilities to operate more efficiently within the fixed rate.