What is meant by "prospective" in health care reimbursement?

In the context of health care reimbursement, "prospective" refers to a system where reimbursement amounts are determined beforehand based on pre-established criteria. This means that the payment rates or amounts are set prior to the delivery of services, allowing for budgeting and predicting costs for both providers and payers.

The prospective payment systems are designed to standardize payments based on specific criteria, such as diagnosis-related groups (DRGs), where hospitals are reimbursed a fixed amount for patient treatment categorized by their diagnoses, regardless of the actual costs incurred. This incentivizes providers to manage resources efficiently since their payment does not vary based on the services provided once the treatment is initiated.

This pre-established method contrasts with retrospective systems, where the costs are evaluated after treatment, leading to potential variations in reimbursement based on actual expenditures. By utilizing a prospective approach, health care systems can enhance cost control and increase predictability in financial planning.