What do prospective cost-based rates rely on?

Prospective cost-based rates rely on reported health care costs to determine payment. This approach involves analyzing the actual costs incurred by healthcare providers for delivering services to patients. By evaluating these reported costs, payers can establish a reasonable reimbursement rate that reflects the expenses providers encounter. This ensures that payments are aligned with the actual costs of delivering care, while also allowing for planning and budgeting from both the provider and payer perspectives.

The emphasis on using reported costs is integral to the prospective payment systems because it seeks to standardize payments for services, thereby promoting efficiency and cost-effectiveness in healthcare delivery. This methodology helps contain costs while ensuring that providers are compensated fairly for their services based on their reported expenses.