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Prospective Payment Systems: Evaluation and Implementation in Residential Treatment Centers

ABSTRACT This article describes the principles necessary for an effective prospective rate-setting payment system. It applies these principles to the child welfare Residential Treatment Center (RTC) program in Colorado. The article reviews the pertinent Colorado Medicaid regulations, illustrates several typical calculations necessary to establish prospective fee-for-service rates, and then applies these methodologies to 45 facilities in Colorado. This article is based on regulations effective in Colorado from 1995–99.