Federal Nursing Home Administrator Practice Exam

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

1. Costs were bundled

2. Costs were fully covered

3. Costs were never bundled

4. Costs were capped annually

The correct answer is: Costs were never bundled

Under the Prospective Payment System (PPS), nursing facilities were reimbursed through a system that involves bundling related costs into a single payment. This means that rather than covering each individual expense, the payment structure combines various services and costs associated with a resident's care into a predetermined rate based on the case mix, which reflects the severity of the residents' conditions and their resource needs. The concept of bundling is crucial in the context of PPS because it encourages efficiency and cost management among healthcare providers. Thus, saying that costs were never bundled does not align with how the PPS operates. The bundling of costs creates a set reimbursement amount that facilities receive, which can influence their operational decisions regarding the delivery of care. This understanding emphasizes that under the PPS, facilities face incentives to manage their resources effectively to provide quality care within the constraints of the bundled payment they receive. The bundled nature of these reimbursements was designed to shift financial risk from the payer to the provider, ultimately promoting both cost-effective care and improved efficiency in healthcare services.