Is the prospective payment system methodology flawed?
• Generally speaking, the answer seems to be no. According to testimony submitted by the Director of Human Services on S.C.R. No. 77, S.D. 2, to the House Committees on Human Services and Health, the Prospective Payment System (PPS) methodology is defined in federal law, as well as in the Hawaii Administrative Rules, and is based on the actual costs of the provider to provide the service. In order to change these payment amounts for inpatient hospital services or skilled nursing facilities, the reimbursement rates for these facilities under the PPS system would need to rebased. The other option is to move to a different reimbursement methodology. Hawaii Pacific Health commented that its member hospitals did not believe that the reimbursement methodology used by the Department of Human Services was flawed, but that it simply was not adequately adjusted to take into account that health care inflation is moving at a much more rapid pace than the consumer price index and, although all prov
