Extensive research was conducted to develop the proposed Prospective Payment System (PPS) and to ensure that it will adequately cover the costs of care for Medicare beneficiaries receiving the home health benefit. However, there is tremendous variation among the patients served by agencies, meaning that the system will impact each agency somewhat differently. Using the methods outlined in this article, agencies can determine potential problem areas under PPS, enabling them to develop and implement solutions before October 1, 2000.