Developing an outpatient prospective payment system based on APGs for the Iowa Medicaid program

This article describes the development of an outpatient prospective payment system (PPS) based on ambulatory patient groups (APGs) for the Iowa Medicaid Program. Currently, hospitals in Iowa are reimbursed for outpatient services on the basis of cost. Because of concern about escalating costs, the Iowa General Assembly mandated development of a hospital outpatient payment system to promote efficient use of resources and high quality care. The first use of APGs for payment across the full spectrum of services will be a testing ground that should have long term implications for outpatient prospective payment and quality improvement efforts.