Prospective payment system (PPS) for inpatient psychiatric facilities (IPFs)

The Medicare, Medicaid, and State Children's Health Insurance Program (SCHIP), Balanced Budget Refinement Act of 1999 (BBRA) (Public Law 106-113), directed the development of a per diem prospective payment system (PPS) for inpatient psychiatric services furnished in hospitals and exempt units. Section 124 of the BBRA contains the complete statutory charge. The major requirements are a per diem payment amount, an "adequate patient classification system that reflects the differences in patient resource use and costs among such hospitals", and budget neutrality in the first year of implementation. An adequate classification system would result in the appropriate targeting of greater prospective payments to providers treating more costly resource intensive patients using statistically objective criteria. The law also required that the Secretary (of the Department of Health and Human Services) submit a report to Congress describing the system, and directed implementation of the inpatient psychiatric prospective payment system (PPS) effective for cost reporting periods beginning on or after October 1, 2002. 

Please refer to the CMS website for additional information on IPFs.