What are the differences between the retrospective and prospective methods of reimbursement?
Retrospective:
a. Reimbursement is based on actual costs incurred in the past. In other words, costs are evaluated retrospectively.
b. The total reimbursement is directly related to length of stay, services rendered, and the cost of providing the services.
c. Providers have an incentive to increase costs and not be sensitive to the need for efficiency and cost containment in the delivery of services.
d. Cost increases generally become essential for maximizing reimbursement and profits.
Prospective:
a. Certain preestablished criteria, not costs, are used to determine in advance the amount of reimbursement.
b. Reimbursement is related to resource inputs.
c. Because of the fixed reimbursement, providers have an incentive to reduce costs and provide services more efficiently
d. Cost increases generally lead to a loss to be absorbed by the provider.